Autumn Statement Update November 2016

As has become common with Budgets and Autumn Statements, in recent years we already knew part of what was coming from previous Statements. We had also already been warned that the economy was slowing down and the Government was going to have to borrow more to give it a bit of a kick-start. All of this meant Phillip Hammond had little room for manoeuvre in his first outing as Chancellor and he started by announcing that he wouldn’t pull any rabbits out of the hat.  He then pulled one of the hat by announcing that he was abolishing the Autumn Statement. After next year’s Budget in Spring, future budgets will move to November. This makes sense in some ways since it means changes announced in an Autumn Budget can now come into force a few months later than 18 months down the line, by which time we’ve all forgotten about them.

Looking at the bigger picture, the Chancellor did announce he would borrow more money to fund infrastructure projects like roads and house building and this would mean that George Osborne’s promises to have the debt repaid by the end of this Parliament would not now be kept. We knew this was likely to be the case and in keeping with tradition Philip Hammond just announced that he was re-writing the fiscal rules, suggesting somewhat vaguely, that we would repay the national debt as soon as possible!

The Chancellor announced an end to most ‘salary sacrifice’ schemes where employees accepted a reduced salary and instead were given benefits from their employer, reducing tax for both.  This change will come into effect next year and will affect things like gym memberships, computers and health screening. Some elements of salary sacrifice like pension contributions and childcare costs will be protected.

The Chancellor was hard on the insurance industry again and has increased insurance premium tax from 10% to 12% and this will mean that insurance premiums are likely to rise across the board when this change comes into force.  He did sweeten the pill on car insurance, announcing that he would be introducing legislation to stop fraudulent whiplash claims, reckoning that this could reduce the average car insurance premium by £40 a year. 

Savers have struggled in recent years and the Chancellor announced the introduction of a new savings bond through NS&I paying around 2.2% interest.

This Bond will have a three year term and a maximum investment of £3,000. Too little too late said many commentators, better than what’s already on the market said others.

There will be a reduction in the amount of money that people who are already drawing money from their pensions can put back in – down from £10,000 to £4,000. This is to stop people ‘re-cycling’ cash in and out of their pensions to benefit from extra tax relief but could cause problems for pensioners looking to take advantage of the very flexibilities that the Chancellor’s predecessor introduced a few years ago.

If you would like to discuss your financial affairs and any impact from yesterdays' Autumn Statement, please contact the McCreas office on 0141 572 1340 or email us to arrange an appointment.