In the face of disappointment at failing to deliver on the coalition’s defining mission of eliminating the structural deficit by 2015, George Osborne’s Autumn Statement was anticipated with a fair amount of cynicism and a lot more excitement surrounding the odds on his choice of tie colour, or how long it would take Ken Clark to fall asleep. With an election just six months around the corner, the Autumn Statement was unquestionably an early advert for the 2015 election.
However, irrespective of the endless labyrinth of political manoeuvres, there are actually some positive outcomes from this Autumn Statement.
Stamp duty overhaul
In a surprise announcement from the Chancellor’s statement today, the out dated “slab rate” system will be replaced by an incremental rate of tax, which will work in a similar way to income tax.
- No tax on the first £125,000,
- 2% up to £250,000, 5% up to £925,000,
- 10% up to £1.5m and
- 12% above that.
Osborne has said this will cut the rate of tax for 98% of house purchases, whilst simultaneously raising money from the 2% who are buying the most expensive homes. This is a direct hit at Labour’s mansion tax, although this new system will cost the government £800m in total.
Amidst growing indignation about the minimal contributions by giant corporations Mr Osborne announced a new policy to crack down on tax avoidance by US multinationals. The “diverted profits tax”, will be introduced in April 2015. These are designed to counter the artificial structures used to minimise companies’ UK profits in order to lower their UK tax bills. Despite the rules not yet being set out in detail, the tax is intended to raise an extra £1bn over the next five years by taxing 25% of net profits generated in the UK that have been shifted out of the country.
Alongside this, there will be further restrictions on banks, limiting the amount of profits that can be offset by losses to 50%. Which is set to bring in an extra £4bn over the next five years.
In favourable news for small businesses on the high street, the Chancellor announced an extension of the 2% cap on increases and a further one year extension of the Small Business Rate Relief.
Personal Finance measures
Personal tax allowance to increase to £10,600 and the higher rate income tax threshold to rise to £42,385 next year. Essentially the tax cut for the rich amounts to a grand total of £100 (so I wouldn’t put out the bunting just yet).
Mr Osborne also announced that widows and widowers would now be able to inherit ISA’s tax-free. So to savers who have been hit by the pitiful interest rates, I would definitely recommend checking this out for more information:
The effects on Tech
- There was much support for fintech. Which included a new ‘bad debt relief’ for those lending on P2P platforms, consulting on allowing crowdfunded debt in ISAs, and measures to open up bank data, notably a call to evidence on how banks can deliver APIs.
- £400m in funding for equity investment in high growth companies through the Enterprise Capital Funds.
- Support for R&D was increased, with tax credits for SMEs increased to 230% from April next year.
- Employer National Insurance Contributions have been scrapped for apprentices under 25, which will help in taking on an apprentice.
- UKTI and the Foreign Office will receive £45 million in additional support, with a focus on helping first time exporters.
Also notable was the announcement of UK postgraduate students having access to student loans of up to £10,000 for the first time ever. This move is hoped to boost the number of young people taking science, technology, engineering, and mathematics fields at Master’s degree level. A move we think is super positive and definitely a step in the right direction.
In conveying that these are still tough times (whilst absolving all blame) and pulling out every rabbit he could find to dazzle us with, George Osborne might have just been successful in managing to make the public feel the right amount of uneasiness about voting Labour next year. The implementation of these changes will go some way in making the economy appear more balanced, but the state of the economy is by no means stable. Low inflation and relatively weak earnings growth has the potential to lead to a drop off in domestic demand, and the staggering national debt needs to be seriously addressed. It is time for an honest Government to make sustainable changes, and not one just poised on distracting us with shiny gifts.