The Chancellor of the Exchequer, Philip Hammond, delivered his Autumn Budget on 29th October 2018. In what was largely regarded as an ‘announcement of further announcements’, the changes were relatively few and modest compared with previous years.
Brexit largely set the tone, with the statement delivered early to accommodate continuing negotiations; measures largely aimed to steady the ship ahead of the UK’s departure from the European Union in March 2019; and the Chancellor left the door open for a further Spring Budget should negotiations result in a ‘no deal’ scenario.
The Prime Minister, Theresa May, had already announced that austerity measures introduced previously by the Conservative government will finally come to an end. Whilst not quite promising that austerity is over, the government seems to acknowledge that the nation suffers from ‘austerity fatigue’, and there is an obvious easing in fiscal policy and increase in departmental spending over the next five years: a marked change to the government’s previous strategy.
In 2018, lower-than-anticipated government borrowings have provided a boost to short term public finances. A major strategic decision by the government is to spend this windfall to boost GDP growth in 2019. This will hopefully aid what is still regarded as fairly anaemic UK economic growth and provide a modest improvement (in both sentiment and performance) as we enter the final period before Brexit.
Measures to help families, ‘grafters’ and the NHS mean that everyone (in England and Northern Ireland, at least) will be better off in 2019/20. Notably, the personal allowance has increased again – now at £12,500 for basic rate taxpayers; and £50,000 for higher rate taxpayers.
Also in England and Northern Ireland, the Stamp Duty Land Tax – which was abolished for first time buyers in the last Budget – has been extended to include those entering a shared ownership arrangement for properties up to £500,000.
We await announcements by the Scottish and Welsh governments in December to know whether similar changes may be introduced in other areas of the country. In the meantime, almost £2Bn in additional funding has been earmarked for Scotland, Wales and Northern Ireland to spend on devolved areas including education, health and housing.
There were few changes for the UK savings market – a non-move which was welcomed by the industry after some pronounced changes in recent years.
For personal investors and businesses, the takeaway points were:
- austerity measures are tipped to come to an end
- £20.5M funding boost to the NHS by 2022
- Stamp duty land tax exemptions for shared ownership purchases of up to £500,000 in England and Wales
- 4.9% increase to the minimum wage, to £8.21 per hour
- increases to the personal allowance and higher rate income tax thresholds to £12,500 and £50,000 respectively
- Greater protection for retirees and pension pots through a ban on pensions cold calling
- Self-employed individuals operating through a company to be treated as employees for tax purposes
- Principal private residence relief rules tightened
- Non-resident property owner tax avoidance tightened
- Entrepreneurs’ relief qualifying period extended
Read our breakdown of the relevant changes for investors here.