The chancellor delivered his first November budget in a buoyant mood although there was little to get excited about and nothing that was going to seriously upset the status quo!
In an attempt to stimulate the housing market and help buyers to get on the first rung of the property market, stamp duty land tax has been abolished for first-time buyers on houses worth up to £300,000 and for the first £300,000 of properties up to £500,000.
However, growth forecast has been reduced from 2% to 1.5%
Personal allowance has increased by £350 to £11,850 and in the basic rate tax band by £1000 meaning that from next year, individuals will start paying tax at the higher rate (40%) when their income exceeds £46,350
More funding was promised for the NHS over the course of this parliament, but on the downside GDP was downgraded for 2017 from 2% to 1.5%, with a further downgrade in 2018 from 1.6% to 1.4%.
Gary Hughes, Hallidays Specialist Tax Manager:
“The chancellor’s Autumn budget was used as a tool to try and get more first-time buyers into the housing market with a £300,000 stamp duty land tax (SDLT) exemption. Whilst this looks appealing at first glance, it could actually have the effect of increasing property prices, which surely couldn’t have been the aim of the chancellor?
A spokesperson for the Office for Budget Responsibility said: “We estimate that the Stamp Duty relief will increase house prices by 0.3 per cent.” Sceptics could therefore say the main financial gain will be made by those who already own properties, rather than the first-time buyers themselves who the policy was introduced to help.
The Labour government of 2008 temporarily suspended SDLT for a year for properties costing less than £175,000, but this resulted in an increase of 0.7 per cent in property prices.
The new rules will likely create a greater demand for first-time buyer properties, but as housing stock is limited, this will inevitably lead to prices being pushed up. The Government’s plans to build 300,000 new homes a year can help to alleviate the supply and demand concerns, but overall how much this new policy will help its intended market is debatable.
Will the likely price rises outweigh the SDLT savings? This remains to be seen.”
Sarah Harkness, managing director of IN Accountancy added:
“Although there really was nothing unexpected or to shout about, I think the scrapping of stamp duty for first-time buyers will have a big impact although I hope this won’t result in property prices increasing”.
The key points at a glance include:
• A 1% increase in the rate of research & development (R & D) tax credit large companies (and in some cases small and medium-sized enterprises) that carry out qualifying R&D expenditure and claim the research and development expenditure credit (RDEC) is being brought in from 1st January 2018.
• A new condition is inserted into the Enterprise Investment Scheme legislation which seeks to exclude tax-motivated investments, where tax relief provides most of the return for an investor with limited risk to the original investment. Broadly the new condition requires a “reasonable” view to be taken at the outset as to whether an investment has been structured to provide a low risk return for investors. If it is decided so then tax relief will be denied.
• Stamp duty land tax (SDLT) is abolished for first-time buyers on homes purchased up to £300,000. There is also a further exemption for properties worth up to £500,000, where SDLT won’t be payable on the first £300,000 of such purchases. Both these measures are effective immediately.
• The national living wage is set to rise from £7.50 per hour to £7.83 per hour from April 2018.
• The personal allowance is to increase to £11,850 from April 2018.
• The higher rate tax threshold is to increase to £46,350 from April 2018.
• Diesel company car drivers will see a 1% benefit-in-kind rate increase from April 2018.
• Employees who charge their electric vehicles at work will not face a benefit-in-kind tax charge from April 2018.
• The VAT registration threshold will be retained at £85,000 for the next two years.
• Indexation allowance for companies is to be frozen at January 2018 on capital disposals.
• From April 2019 income tax will apply to royalties relating to digital retail sales in the UK.