Philip Hammond’s 2017 Budget is being portrayed as a pivotal moment both for his prospects as chancellor and for the future of the government as a whole.
Against a backdrop of turmoil across Westminster, his ‘fit for the future’ speech this afternoon was always going to be as much about politics as the nation’s finances. But for families across the UK looking to make the most of their money, the focus will be on the details that affect their household finances.
The Chancellor acknowledged that families need help to cope with the cost of living, and said he wanted to make the dream of home ownership a reality for all generations.
As part of his ‘balanced approach’ to the economy, he said that in addition to helping families and building more houses, he wants to support public services, invest in jobs and infrastructure, and keep taxes low.
Here are the main points…
The Chancellor’s plan to solve the housing crisis included a number of initiatives to spur on building, but it’s the abolition of Stamp Duty that will excite first-time buyers the most.
From today, first-time buyers won’t pay Stamp Duty on purchases of up to £300,000.
Until today, duty has been payable at 2% on the value of a property above £125,000, and at 5% on the value of a property over £250,000 (it rises to 10% and 12% on the value of properties valued at close to or over £1 million).
For first-time buyers in expensive areas, this Stamp Duty relief will be available on the first £300,000 of the purchase price of properties up to £500,000. The normal rate of 5% will be due on the £200,000 excess.
Any first-time buyers purchasing properties worth more than £500,000 will not receive any Stamp Duty relief.
The Chancellor said this will benefit 95% of first-time buyers and see 80% freed from Stamp Duty bills completely.
Personal allowances will increase in line with expectations. From next April, everyone will be able to earn £11,850 before paying tax at 20% (currently £11,500). The 40% higher rate of tax will kick in at £46,350 (£45,000).
The government’s aim is to increase these figures to £12,500 and £50,000 by the end of this Parliament.
The additional rate of tax, levied at 45%, is paid on earnings over £150,000.
MINIMUM LIVING WAGE
From April 2018, the national living wage will increase by 4.4%, from £7.50 to £7.83 per hour.
The Chancellor has initiated an investigation into a plastic tax or levy, in a bid to help the environment by reducing the use of single-use plastic such as bottles and take-away trays.
Despite speculation that there would be a controversial reduction to the VAT registration threshold, it will remain at £85,000 for the next two years.
Lowering the threshold would have brought more small businesses into the VAT regime, with all that entails for book-keeping and compliance.
The Chancellor announced a number of changes aimed at addressing some of the concerns about how Universal Credit is being rolled out.
First, the system to get an advance payment is being accelerated, so that you’ll be able to get a full month’s payment within five days of applying for it.
You’ll also be able to apply for an advance online, and the repayment period for advances will be extended from six months to 12 months. This will come into effect from January 2018.
Second, from February 2018, the seven-day waiting period at the beginning of a claim will be abolished, so that your entitlement begins on the day you make a claim. This means that the typical waiting time for your first payment is reduced from six weeks to five weeks.
Finally, from April 2018, if you already receive Housing Benefit when you claim Universal Credit, your Housing Benefit payments will continue for two weeks.
This amounts to a £1.5 billion package to improve the way Universal Credit is delivered.
The Chancellor is introducing higher vehicle excise duty - car tax - for diesel cars that fail to meet guidelines on emissions from April 2018. Fuel duty remains frozen.
Chancellor Hammond announced measures to accelerate the adoption of electric cars, which he said would be the precursor to widespread uptake of self-driving vehicles on Britain’s roads.
He said £400 million will be used to make necessary improvements on electric car infrastructure, including increasing the number of charging stations across the country.
There will also be £100 million in government grants aimed at helping people purchase private electric cars and £40 million for further research and development.
Also, at present, if you charge your electric car at work you are taxed on it as a benefit-in-kind. This tax will be removed next April.
Alongside working hard to remember his own numbers, the Chancellor pledged money to help kids be more comfortable with theirs.
An advanced ‘Teaching for Mastery’ maths programme will roll out to 3,000 more schools, there will be incentives for schools that get pupils to take maths A-Levels, and the setting up of specialist ‘maths schools’ will be supported financially.
This is separate to financial education - this is already on the curriculum, but the chancellor resisted calls to help schools increase the focus on it.
There will be no increase in duty on alcohol, but legislation calling for a 1% increase on high-strength alcohol, including white cider, will be introduced from 2018/19.
There will be a 2% increase on tax on tobacco above the rate of inflation, with an additional 1% (above inflation) on rolling tobacco.
The Chancellor announced the so-called ‘millennial railcard’, which will offer 30% off rail travel in the UK for those aged 26 to 30 – about 4.5 million people. This is an extension of or goes alongside the existing 16-25 Railcard.
Other cards already available include the 16-25 Railcard, Two Together Railcard, Family & Friends Railcard, Network Railcard, Senior Railcard, and Disabled Persons Railcard.
INSURANCE PREMIUM TAX
In a welcome development, there was no increase in insurance premium tax (IPT). Many commentators had feared it would rise from its current level of 12%.