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A balanced budget with a few surprises
Chancellor of the Exchequer Philip Hammond has delivered what he has called a "balanced Budget" designed to support an "inclusive economy".
This was a business-friendly Budget that also offered some support to those in need. And Hammond managed to pull a few rabbits out of the hat – notably by cutting stamp duty for first time buyers.
However, his measures were set against a backdrop of a weakening UK economy. The Office for Budget Responsibility (OBR) has cut its forecasts for growth and the UK economy is now expected to grow by 1.5% in 2017, significantly down from the previous forecast of 2%. Growth has also been cut to 1.4% in 2018, 1.3% in 2019 and 2020, 1.5% in 2021 and 1.6% in 2022.
For small businesses and the self-employed, it was what Hammond didn't do that probably made the biggest impact. Despite widespread fears of a reduction, the chancellor announced that the VAT threshold will remain at £85,000 for the next two years.
There was also no word in the speech of IR35 reforms being extended to the private sector. However, according to the Freelancer and Contractor Services Association (FCSA) a proposed consultation (although no action at this stage) is mentioned in Hammond's "red book".
Yet again, the planned fuel duty rise for petrol and diesel cars has been scrapped. And, although road tax will rise in April 2018 for diesel cars that don't meet the latest standards, this measure will not apply to van owners.
After extensive lobbying by small business groups, Hammond did announce changes to the business rates system – from April 2018, rates increases will be pegged to the CPI measure of inflation, not RPI. And revaluations will take place every three years, not every five years, to soften the impact of rates rises. The Government estimates that this represents a £2.3 billion benefit to small businesses over the next five years.
In addition, Hammond promised to push for changes in the law in order to remove the so-called Staircase Tax.
There were just two key changes to personal taxation – from April 2018, the tax-free personal allowance will increase to £11,850 and the higher rate income tax threshold will go up to £46,350.
The National Living Wage (for workers aged 25 and over) will rise to £7.83 an hour from April 2018. National Minimum Wage increases, said Hammond, will be in line with the Low Pay Commission's recommendations.
A whole raft of measures on housing included the immediate scrapping of stamp duty for first-time buyers on properties worth up to £300,000. In London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by first-time buyers will be exempt from stamp duty.
As well as housing and the NHS, the chancellor announced £2.3bn for investment in research and development and there were spending pledges on infrastructure including £500m for 5G mobile networks, fibre broadband and Artificial Intelligence and £540m to support the growth of electric cars.
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