Autumn Statement 2016 - Overview

23rd November 2016

Dealing with uncertainty in the economy featured heavily throughout the Chancellor’s speech, ensuring there is stable fiscal policy enabling businesses to plan ahead was central to today’s announcements.  

Stating no other major economy deems it necessary to make hundreds of tax changes twice a year and neither should we - the revelation that this would be Mr Hammond’s first and last autumn statement was welcomed by the House. The intimation that there would just be one major announcement each year seemed like a sensible positive step, right until he followed up with a plan to move the budget to autumn and introduce a Spring Statement instead (cue guffaws from the opposition). Mr Hammond’s ideal is that the autumn Budget will give sufficient time for planning and consultation ahead of changes and the Spring Statement will not deliver major unexpected news.  

With unemployment at a record low and the deficit reduced by almost two thirds from 10.1% to 4% of GDP Britain has been on its way to recovery. However, faced with a period of uncertainty following the Brexit vote and transition ahead, the Office for Budget Responsibility (OBR) has forecast a slow in growth to 1.4% in 2017, recovering to 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021.  

It had been a fundamental goal of the current government to continually reduce the deficit and so that the economy would run at a surplus by 2019/20, however, as was widely anticipated, the Chancellor conceded this is no longer achievable. He has pledged, however, to continue to strive for this goal and aims that it will be met as early as possible in the next Parliament.

Focusing on innovation, infrastructure and productivity, there will be a fund set up for Research and Development tax credits, another for investment in innovative firms planning to scale up and regional support through Local Growth Funds.

Using a favourite phrase of his predecessor, Mr Hammond wants to make it clear that ‘Britain is open for business’. To affirm this, he will stick to the financial road map previously set out with a view to reducing corporation tax to 17% by 2020 and making Britain a number one destination for business. The personal allowance should rise to £12,500 and the higher rate income tax threshold to £50,000 by the end of this Parliament. There had been speculation that there would be changes to or an abolition of the proposed Residence Nil Rate Band for inheritance tax, but this was not forthcoming and so we anticipate that it will be introduced as planned in April 2017.

There were some other taxation changes introduced, amongst other things an alignment of national insurance for employees and employers, a reduction in the money purchase annual allowance, the application of national insurance to redundancy payments and a revision of treatment of some salary sacrifice arrangements, but nothing that would be seen as a significant.

As always, the devil will be in the detail and the effects of today’s announcements will become more apparent in the near future. We’ve pulled this overview together quickly to give you our interpretation of today’s event, however watch this space and we’ll keep you updated with a full detailed summary over the next few days.

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