Blog: 2017 Autumn Budget

Phillip Hammond presented his second Budget of 2017 against a backdrop of Brexit negotiations and political uncertainty, in the UK and across the Eurozone. With so many constraints and the lessons of March firmly in mind, the Chancellor was predictably cautious but, as usual, there were a few surprises.

Mr Hammond could at least take some comfort from the financial figures released before the budget, which showed borrowing fell by £4.1bn in the first seven months of 2017 compared to the same period in 2016.

This might appear to have given the Chancellor “wriggle room” but the Office for Budget Responsibility (OBR) had adjusted its assumptions, notably productivity growth, which reinstated the Treasury’s limited room for manoeuvre. The OBR also cut its growth forecast for 2017 from the 2.0% it saw in March to 1.5%, 0.1% lower than the central assumption made by the Bank of England its Quarterly Inflation Report. Economic growth further out is also disappointing: the OBR says that by 2021/22 the UK economy will be 2.1% smaller than implied by its March 2017 growth forecasts.

While working-age benefits generally remain frozen, the government finances still suffer because of the knock-on effect on index-linked gilts. This was a problem highlighted in the public sector finance figures, which showed the £6bn government interest costs in October were the highest ever recorded for that month. However, the government remains able to borrow 10-year money via the conventional gilts market at a rate of around 1.25% - just as well with nearly £120bn of borrowing to undertake in 2018/19.

So what did emerge from this first Autumn Budget?

Here are some of the key points:

  • Stamp duty abolished for first-time buyers on homes up to £300,000, and on the first £300,000 of properties up to £500,000.
  • Basic rate of income tax rises to £11,850 from April 2018.
  • A £1,350 rise in the higher rate threshold for 2018/19, to £46,350, moving towards the 2020/21 target of £50,000. However, this will not apply fully to Scotland.
  • An extra £3 billion to prepare for Brexit over the next two years.
  • The National Living Wage for those aged 25 and over increases from £7.50 per hour to £7.83 per hour from April 2018. The National Minimum Wage will also increase for 21 to 24 year olds (£7.38ph), 18 to 20 year olds (£5.90ph), 16 and 17 year olds (£4.20ph) and Apprentices (£3.70ph).
  • Business rates will switch to being increased by the Consumer Price Index (CPI) two years earlier than planned
  • A £400 increase in the capital gains tax annual exemption to £11,700.
  • The first inflation-linked increase in the Pensions Lifetime Allowance, to £1.03m - and no changes to the Pensions Annual Allowance.

If you’d like to find out how the Autumn Budget affects you, please get in touch.