Autumn Statement 2015: winners & losers
Nevertheless, as ever, there will be winners and losers as new policies are introduced, and previously floated changes are confirmed. Here’s our take on who’ll be better off as a result.
Pensioners: Will see the state pension rise by 2.9% in April, to £119.30 a week.
First time buyers: Will see the Help to Buy Equity scheme extended to 2021. Londoners will be eligible for a five-year interest free loan worth up to £240,000 to help them step onto the property ladder. The Chancellor also extended plans for affordable house properties, with starter home discounts on 200,000 properties, earmarked 135,000 properties for shared ownership schemes and added 10,000 properties to the rent-to-own scheme.
Housing association tenants: Will see their chances of home ownership improve, as a right-to-buy pilot scheme was rolled out to five housing associations.
Downsizers: George the Builder’s plans also included 8,000 new homes for older people and those with disabilities. It’s not much, but it’s a start.
Tax credit recipients: Osborne scrapped planned cuts to tax credits, though arguably the (delayed) cuts to Universal Credit will hit many of the same people. And other previously announced changes, such as scrapping child support beyond the first two children in a household, will go ahead as planned.
Apprentices: A 0.5% levy on large companies’ payrolls will fund an extended apprenticeship scheme that aims to train 3,000,000 people by 2020. This should create more training opportunities for younger people, but a cynic could argue it’s an opportunity for employers to sidestep the increased minimum wage, which doesn’t apply to people under 25.
Part time students and post-graduate students: Will be able to access the student loan system from 2016.
Usain Bolt: Has previously reportedly avoided competing at athletic meets in the UK, because of the potential tax bill. He’ll be pleased to see “The government will exempt non-resident competitors in the 2017 World Athletics and Paralympics Championships and the 2016 London Anniversary Games from income tax on their earnings from the event.”
Drivers: Are expected to see insurance premiums fall by £40-£50, due to lower legal costs from injury claims being moved to the small courts , and an end to the right to claim for some minor injuries like temporary bruising. Aviva claims 80% of insurance claims in the UK are for whiplash and ‘soft tissue related injuries’, compared to just 3% in France. There’s also a £250 million fund to fix potholes.
Flood plain residents: £2.3 billion has been allocated to build flood defences for 300,000 homes.
Small business owners and entrepreneurs: Will benefit from the creation of new enterprise zones, and the extension of rate relief for small employers for another year.
Housebuilders: May do as well as first time buyers from the house building plans. The Spending Report outlines plans to sell land worth £4.5 billion to build 160,000 homes. That works out as about £29,000 per property, which should leave the developers a healthy profit margin, even with a 20% discount of market values on starter homes. They’ll also benefit from a ‘cheaper domestic energy efficiency supplier obligation’, which hopefully won’t increase energy costs for new build properties.
Commuters: Regulated rail fair rises will be linked to the retail price index throughout this parliament, less than the previous RPI + 1% deal.
Near-retirees: No changes to the flat rate state pension mean some 80% of people retiring in 2016 will be worse off, according to Columbia Threadneedle. Women will be worse affected, as there are no planned changes to increase the state pension age to 66.
Buy to let investors and second home owners: Will be charged an extra 3% stamp duty on buy to let properties from 1 April 2016. They’ll also have just 30 days to calculate and settle capital gains tax (CGT) from property disposals from April 2019. Currently sellers have between 10 and 22 months to pay CGT.
High end Isa savers: There will be no increase to Isa or Jisa allowances. Any increase would have been linked to the September inflation figure, which was negative, so arguably this is a real term increase. Additionally, the Isa allowance has increased massively in recent years, and the vast majority of savers don’t use the full amount.
Tax avoiders: New penalties have been introduced under the General Anti-Avoidance scheme, meaning those found guilty will have to fines worth 60% of their tax bill.
Students: Will see the repayment threshold frozen, effectively increasing their repayments in real terms. The interest calculation is changing, which will leave higher earners better off, but inflate student debts for others. Low income students will see grants abolished, as anticipated, and grants for nurses and healthcare workers will also be removed.
Auto-enrolled employees: Workers who have been moved to the new auto-enrolment system will see contribution hikes delayed for six months to align with the tax year. They’ll receive less from their employers as a result, and the government expects to save £720 million from the changes, presumably in tax relief.
Local councils: While they may be permitted to increase council tax by 2% a year to pay for social care, they’ll need to sell off assets to maintain their funding.
Green energy investors: All energy generation activities will be excluded from Venture Capital Trust tax relief.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.