While adopting a bullish tone on the prospects for the UK economy as the country prepares for Brexit, he acknowledged that “too many families are feeling the squeeze”.
The Chancellor said inflation would reach 2.4% in 2017 – higher than the Bank of England’s long-term target of 2% – before falling back to 2.3% in 2018 and 2% in 2019.
He expects wage rises to outstrip inflation during this period, although many households who rely on savings interest and benefits will be anxious about the impact of rising prices on their family finances.
Sweeping reforms were also announced to the tax regime for the self-employed, which will see many paying more in National Insurance Contributions.
One area surprisingly not mentioned by the Chancellor was car insurance.
Last month, the Lord Chancellor, Elizabeth Truss, announced an overhaul to the way personal injury compensation payments are calculated.
Insurance companies said her reforms to the so-called ‘discount rate’ would add around £70 a year to premiums, with younger drivers paying up to £1,000 a year extra because they are statistically more likely to be involved in serious accidents.
Following intense lobbying by the insurance industry, which included an evening briefing with Mr Hammond at 11 Downing Street last week, it was widely expected that the Chancellor would use his Budget to announce a modification to the discount rate change, which takes effect on 20 March 2017.
His failure to do so means drivers should still be wary of sudden, steep increases in premiums next time they come to renewal, and should follow our guidance on how to keep a lid on their insurance costs.
Other Budget highlights include:
The interest rate for the new investment bonds from National Savings & Investments was confirmed at 2.2% on deposits up to £3,000 over a three year term.
The bond will pay £66 in the first year and £202 over the full three year duration on a £3,000 investment, once the interest has compounded.
Anyone over the age of 16 can open a bond. The minimum investment is £100 and you’ll have a year from this April to open an account with NS&I.
As of April 2017, Vehicle Excise Duty (VED) rates for cars, vans and motorcycles registered before April 2017 will increase by the Retail Prices Index (RPI).
Road User Levy rates and Heavy Goods Vehicle VED rates will be frozen from April 2017.
The government is looking to work with the industry to update the levy, so hauliers that plan their routes efficiently will be rewarded. This is with the aim of improving air quality and efficient use of the UK’s roads.
The government will continue to invest to support the development of driverless cars, which should improve road safety and bring down car insurance premiums over the course of the next decade.
The Chancellor confirmed that the government is drafting a Green Paper discussion document on how the welfare of consumers can be protected and enhanced given that, in his words, so many consumers feel ‘the dice are loaded against ordinary people’.
Action will also be taken to tighten up regulations around restrictive subscriptions and complicated terms and conditions.
Personal tax bands and allowances
As previously announced, the income tax personal allowance will rise to £11,500 in April, with the higher rate threshold rising to £45,000.
The personal allowance is scheduled to rise to £12,500, and the higher rate threshold to £50,000, by the end of this parliament in 2020.
Self-employed people face a tax hit following the Budget. National Insurance Contributions – simply another type of tax we all pay – will increase for self-employed individuals from April next year.
This will happen when Class 2 NICs are abolished in 2018 (something we already knew about) and Class 4 NICs increase from 9% to 10%. They will rise to 11% in 2019.
In addition, the size of dividends you can withdraw before paying tax will be reduced from £5,000 to £2000.
Furthermore, in a bid to ‘enhance the fairness of the system’, Hammond has called for further push to penalise professionals who avoid tax.
National Living Wage
The National Living Wage for working people over the age of 25 will go up from £7.20 an hour to £7.50 an hour in April 2017. This means an extra £500 a year for someone working full time.
It was confirmed that from September this year, the free 15 hours childcare available to working families will double, to 30.
Alcohol & tobacco
Duty rates on all tobacco products will increase by 2% above RPI inflation, the change will come into effect as of today (8 March 2017). As of 20 May 2017, the rate for cigarettes will be set at £268.63 per 1,000 cigarettes.
There will be a new band for still cider with a strength just below 7.5% abv to target white ciders.
An investment of £200m will be made to improve fibre optic broadband in rural areas alongside a £16m investment in 5G technology.
Work will be undertaken to relieve what the Chancellor called ‘pinch points’ in the national road network, with £220m earmarked to help people to commute with ease between towns and cities and to alleviate urban congestion.
The government had been expecting to receive £1bn from the tax on soft drinks, and they intended to invest this in school sports and healthy living programmes.
They haven’t received as much money as they expected to, because drinks manufacturers are changing their recipes to include less sugar. But the Chancellor said the government is still going to invest the full £1bn in healthy living programmes and school sports.
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