The Chancellor of the Exchequer George Osborne this afternoon delivered his Conservative Government’s first Autumn Statement and Spending Review of this Parliament.
What does it mean for the Country?
UK Economy. The UK shares with the USA the status of being the world’s fastest growing advanced economy. The Chancellor today stuck to his target to deliver a Budget surplus of £10bn a year by 2019/20.
State Spending. Spending by the State will be only 36.5% of GDP (Gross Domestic Product) by 2020 compared to 45% in 2010, demonstrating the scale of the reduction in State spending.
Police Budget. The Chancellor announced that there will be no cut in the Police budget and that it will rise in real terms during this Parliament.
What does it mean for individuals?
Tax credits. The planned cuts to working tax credits was reversed, after weeks of pressure on the Chancellor. This will come as a relief to working families on lower incomes.
State Pensions. Those retiring from April 2016 will be entitled to a new flat rate State Pension of almost £8,100 per annum. You will need to have at least 10 years on your national insurance record to be entitled to a State Pension at all – and 35 years to qualify for the maximum (£155.65 per week). The State Pension will continue to rise in line with the “triple lock” which has been protected.
Those already in receipt of the Basic State Pension before April 2016 will see a rise in the Basic State Pension to just over £6,200 per annum – £119.30 per week.
ISAs. The annual contribution limits for Individual Savings Accounts (ISAs) and Junior ISAs have been frozen. In 2016/17 the ISA limit will remain at £15,240 and the Junior ISA limit at £4,080.
Buy to let and second homes. BTL investors and second home owners are to be hit with Stamp Duty increased by 3% on purchases from April 2016. From 2019 when digital tax accounts are planned to be introduced, Capital Gains Tax (CGT) will also be payable within 30 days on the sale of residential properties, instead of the current 21 months. Properties owned by limited companies won’t be affected by the changes.
Income tax devolved to Wales. The Chancellor announced that powers to alter income tax rates will be devolved to the Welsh Assembly – without a referendum. This could mean workers in Wales will pay a different rate of income tax to those over the border in England.
Annuity sales. The Government has previously promised that they will create a market for “second hand annuities” – which would mean retirees already receiving guaranteed income from an annuity for life, could exchange that income for a lump sum. There were no further details in the Autumn Statement but there was confirmation that more will be revealed in December.
IHT on Pensions. The Chancellor announced that they will introduce legislation to exclude pensions in income drawdown from inheritance tax. This change will be backdated to April 6th 2011.
For those who were expecting brutal cuts, they will either be relieved or disappointed.
Some on lower incomes will clearly be pleased that the tax credits cuts have been reversed, marking a significant u-turn in policy for the Chancellor.
Earlier predictions about changes to pensions tax relief were also wide of the mark – but the Chancellor did confirm that they are still considering responses from a consultation on the matter and will report in the 2016 Budget.
The Chancellor reasserted his determination to cut the deficit. An increase in defence spending and no cuts in the Police budget will also be viewed as significant in the wake of the increased terror threat and escalating instability in the Middle East.
Pensioners should also have reason to be cheerful with big increases in the Basic State Pension and the new flat rate State Pension.
If you would like to discuss any of the changes announced in the Autumn Statement please contact your Cambrian adviser’s PA or if you do not currently have a Cambrian adviser contact us on 01244 539595 to arrange a free consultation meeting.