Britain has waited 21 years for an Autumn Budget, but on the evidence we saw yesterday, Philip Hammond still needs more time to come of age into his role as Chancellor. Undoubtedly hampered by poor productivity forecasts and the looming spectre of Brexit, Hammond’s austere approach won’t leave the public with a sense of economic comfort and stability in the months to come. Nonetheless, it’s not the time for everyone to batten down the hatches. The Chancellor threw in a few golden nuggets for first-time buyers, small businesses and those on low wages.
The cancellation of stamp duty for first-time buyers purchasing properties worth up to £300,000 was one of the show stopping moments from his speech. This removes a significant burden for many thousands of people who have been struggling to access the housing market, and will increase house purchases. However, it is of no value to other potential buyers. The Association of Accounting Technicians will continue to call for stamp duty liability to be switched to the seller, so that people moving up the housing ladder would be paying duty on the (likely) lower-priced house they are selling, not the higher-priced one they are buying.
Calls for Stamp Duty to be scrapped altogether were a step too far, given this would have cost the Exchequer in excess of £11bn per annum, leaving a gaping hole in already squeezed public finances. Instead, the change set out by Hammond will be far less costly for the Government, and will at least go some way to improving Britain’s housing mobility crisis and help both employment and productivity.
The decision to freeze the VAT registration threshold at £85,000 for two years, allowing the Office of Tax Simplification more time to work on their recent recommendations report, will act to the benefit of thousands of small businesses throughout the UK who will remain out of paying VAT altogether. Frankly, it would have been odd timing to make major reforms to VAT – it is, after all, governed by European legislation and as such will likely be further reviewed after our March 2019 withdrawal from the EU. Furthermore, after the debacle over a National Insurance rise in the Spring Budget, it would have been a very bold and unnecessary move for the Chancellor to implement at this time.
For the UK’s 5.5 million small businesses, news of a freeze in the corporation tax indexation allowance on chargeable gains arising in a company will prove to be some comfort. But the evidence is clearly there that SMEs are concerned about economic uncertainty, given that they are holding in excess of £170 billion in current and deposit accounts, a six per cent rise on the previous year.
Small businesses are not entirely trusting of bank lending given the recent threat fromthe FCA into RBS, and many have been hit hard by rising business rates introduced in April 2017. We are pleased that the Chancellor announced the bringing forward of an indexation switch from RPI to CPI and the addressing of the ‘staircase tax’, helping to provide £2.3 billion of support to businesses to reduce the burden of the rates. However, we feel that more frequent re-evaluations of the rates would help SMEs budget more effectively for their future financial security.
Finally, while the increase in the National Living Wage to £7.83 from April 2018 was expected but nonetheless welcomed, we are disappointed that neither the simplification of ISA products nor the promotion of Apprenticeship Levy funds appear to be on the Chancellor’s radar at this time.
Brian Palmer is a tax policy expert at the Association of Accounting Technicians.
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