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In his first Autumn Budget, Philip Hammond delivered a speech clearly designed to woo younger voters, with a finale of tax breaks for first-time buyers, but he also left wealthy voters relatively unscathed.
Here is our summary of how the key measures will affect your personal finances:
Housing and stamp duty
Stamp duty will be abolished for first-time buyers purchasing properties valued at up to £300,000, or on the first £300,000 of a property priced up to £500,000. Buyers will pay the normal rates of stamp duty on any amount above £500,000. Experts said this measure would save £1,660 on the average first-time buyer property.
The chancellor said 95 per cent of first-time buyers who pay stamp duty will benefit and added that 80 per cent of people buying their first home will pay no stamp duty.
“Abolishing stamp duty for first-time buyers on properties up to £300,000 is a strong move towards stimulating the property market. However, as recognised by the chancellor, this won’t help first-time buyers in London, so removing it from the first £300,000 of a £500,000 purchase will be a huge help,” said Chris Lloyd, associate director at Enness.
“For example, previously a first-time buyer would have paid £15,000, whereas now they will only pay £10,000. This will mean first-time buyers are left needing to find a lot less on top of the deposit for them to get on to the ladder.”
However, the chancellor’s speech included bad news for second homeowners with news that local authorities would now have the power to charge a 100 per cent council tax premium on empty properties.
The personal income tax allowance will rise from £11,500 to £11,850 in April 2018, while the threshold at which the higher rate of tax of 40 per cent applies will rise from £45,000 to £46,350. The changes will save the average basic rate taxpayer £1.35 a week.
The chancellor doubled the investment limit in the Enterprise Investment Scheme (EIS) for knowledge-intensive companies, but said he would ensure that the tax-efficient schemes were not used “as a shelter for low-risk capital preservation schemes”.
Investors can currently put up to £1m into EIS qualifying investments per year and receive tax relief upfront, that limit now increases to £2m. Businesses receiving the investment could also see their potential annual income double through the scheme, which the government said will unlock more than £7bn in growth investment.
The move comes as part of the government’s patient capital review, which is designed to support innovative UK businesses and clamp down on investors using the vehicles to invest in lower-risk, rather than high-risk innovative companies. The chancellor said a new test would also be introduced to reduce investment directed towards lower-risk investments.
Graham Peale, partner at Killik & Co, said: “We expected an announcement on lowering or eliminating the limits on lower-risk, asset-backed EISs. However, the government has been quite clever in that it is redirecting where investment should go by raising the limits on high-risk EIS.”
Pensions tax relief remained unchanged. The Budget also confirmed the annual allowance for pensions is to increase to £1.03m from next April, in line with the consumer prices index.
“Following a series of reductions, this is good news for savers, even if on the surface the increase isn’t large,” said Kate Smith, head of pensions at Aegon. “A small increase is welcome for those nearing the limit, but this is a complex area and people seek financial advice to avoid paying unnecessary tax.”
Some had also predicted that there could be changes to the current salary sacrifice system but this too remains unchanged, and the basic state pension will increase by the triple lock.
“The state pension will increase by 3 per cent next April from £159.55 to at least £164.37, giving pensioners an annual rise of £250,” said Ms Smith. “However, those who reached state pension age before April 6 2015 and are on the old basic state pension will only see their state pension increase from £122.30 to £125.97 a week, giving an annual increase of only £191.”
The chancellor has announced a new railcard for those aged 26-30, giving 4.5m more young people a third off their rail fares.
Meanwhile, short-haul air passenger duty rates and long-haul economy rates to be frozen, paid for by an increase on premium-class tickets and on private jets.
Mr Hammond unveiled a package of measures to clamp down on avoidance and evasion expected to raise £4.8bn by 2022-23.
The Budget increased the time limits for HMRC assessments of offshore tax non-compliance, as much as tripling the current time limits to at least 12 years in all cases,
It also unveiled further measures to tackle online VAT fraud. In addition, it announced more resources to strengthen the tax authority’s ability to tackle tax avoidance in the future, totalling more than £2bn by 2023.
The chancellor announced a £1.5bn package to “address concerns” about the delivery of universal credit and said the seven-day initial waiting period for processing of claims would be scrapped. Claimants to get one month’s payment within five days of applying.
From April 2018, vehicle excise duty on polluting diesel cars will go up by one “band” of duty, although vans will not be affected. Charging electric vehicles at work will not count as a “benefit in kind” for tax purposes.
“We will cancel the fuel duty rise for petrol and diesel cars scheduled for April. Since 2010 we have saved the average car driver £850 and van driver £2,100,” Mr Hammond said.
Reporting by Lucy Warwick-Ching, Josephine Cumbo, Kate Beioley, Vanessa Houlder and James Pickford