Chancellor of the Exchequer Philip Hammond MP delivered the Autumn 2017 Budget on November 22.
It has become almost traditional for the Chancellor to leave one of the biggest announcements until the very end, and this speech was no exception. Shortly before sitting down, Mr Hammond announced that stamp duty for first-time buyers had been all but abolished with immediate effect.
First-time buyers purchasing homes valued at less than £300,000 will now pay no stamp duty. Those buying homes valued at between £300,000 and £500,000 will pay no stamp duty on the first £300,000. It all means that 80% of first-time buyers will pay no stamp duty, and that 95% will receive some form of benefit from the latest changes.
The changes do not apply in Scotland, as the setting of stamp duty rates there is the responsibility of the Scottish Government. Responsibility for stamp duty in Wales will also be devolved to the Welsh Assembly from April 2018.
However, the Chancellor was also forced to deliver some bad news when he announced that the growth forecasts for the UK economy had been downgraded. The forecast for the rise in Gross Domestic Product for 2017 was reduced from 2% to 1.5%. Forecast growth in 2018, 2019, 2020 and 2021 has been reduced to 1.4%, 1.3%, 1.5% and 1.6% respectively.
Productivity growth was revised down by an average of 0.7% a year up to 2023.
Whilst employment is at near record high levels, and another 600,000 people are forecast to be in work by 2022, wage inflation is expected to remain limited. The Institute of Fiscal Studies said it was possible that average UK earnings in 2022 could be lower than they were in 2008, which it described as “astonishing”.
Consumer Prices Index (CPI) inflation is expected to peak at around 3% in the final months of 2017, before falling to around 2% over the following 12 months.
The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018, a rise of 4.4%. The National Minimum Wage for those aged 21-24 will rise to £7.38 per hour, while for 18-20 year olds it will be £5.90, for 16 and 17 year olds it will be £4.20, and for apprentices it will be £3.70.
The personal allowance – the amount a person earns before they start paying income tax – will rise from £11,500 to £11,850 from April, but this is merely a rise that reflects the current rate of inflation. The higher-rate income tax threshold will increase to £46,350.
The pensions lifetime allowance will increase, but again only in line with CPI, and will now be £1,030,000 from April next year. The amount that can be contributed each year into a Junior Isa or Child Trust Fund will increase in line with CPI to £4,260, but the annual subscription limit for conventional ISAs will remain at £20,000. Also staying the same is the £5,000 zero tax rate savings income band.
Business rates will rise in line with CPI from next April. Under the current system, rates rise in line with the Retail Prices Index, which is often higher. Business rates revaluations will take place every three years, rather than every five years, as at present, with the change taking effect after the next revaluation, currently due in 2022.
The Chancellor also announced plans to build 300,000 new homes a year, and to create five new ‘garden’ towns.
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