Amid growing pressure on the Government over its handling of Brexit, Chancellor Philip Hammond has delivered his final budget before the UK’s planned departure from the EU.
In his Budget announcement, the chancellor announced that the era of austerity “is finally coming to an end”.
2018 growth forecasts were downgraded to 1.5% in March to 1.3% as a result of the impact of bad Spring weather. The forecast for 2019, however, has been raised from 1.3% to 1.6%, with annual forecasts being raised to 1.4% for 2020, 1.4% in 2021, 1.5% in 2022, and 1.5% in 2023.
In terms of employment, the chancellor advised that 3.3 million more people are in work since 2010, with 800,000 more jobs forecast by 2022 and wages growth at its highest in nearly a decade.
But how will the budget affect contractors, the self-employed, and first-time buyers? Here’s an overview of the policies that will have the most impact:
The personal allowance for personal tax is set to rise from £11,850 to £12,500 in April 2019, a year earlier than planned. The higher-rate tax threshold will also rise from £46,350 to £50,000.
National Living Wage
The National Living Wage will increase by 4.9% from £7.83 to £8.21 per hour from April 2019
Many freelancers and contractors will face higher taxes after the Chancellor, Philip Hammond, announced that tighter tax rules for those working in the public sector will be extended to those working for private firms, although this will not be introduced until April 2020.
Under the changes, from April 2020, large and medium sized businesses such as banks, will take the responsibility for deciding which contractors need to pay tax and National Insurance as if they were employees, as well as determining whether the contactors they hire are genuinely self-employed. The Treasury estimates that these changes will generate an extra £2.9bn by 2024.
This is a blow for independent professionals. The saving grace of this announcement is the time the Chancellor has provided before these new rules will come in to affect, something our counterparts in the public sector were not afforded. This should provide time for contractors, freelancers and hiring clients to plan and get advice on how they will engage moving into 2020 and beyond.
Our conversations with some of our clients have been upbeat given the news. This will of course change the landscape for many, but as a growing population of the UK workforce we are sure that this sector can continue to prosper with the right advice.
A useful link from the HM treasury on the changes to IR35 Private sector:
Stamp duty relief for first-time buyers has been extended to those buying shared ownership homes worth up to £500,000. Critics have pointed out however, this doesn’t do anything to address the lack of affordable property available to many first-time buyers and new homeowners.
The chancellor also confirmed there will be a consultation on a new stamp duty charge for non-residents. The details of the scheme are set to be published in January but, under the current proposal, non-residents buying residential property in England and Northern Ireland would face a surcharge of 1%.
Help to Buy
The government’s flagship Help to Buy equity loan scheme has also been extended for two years from April 2021; meaning it will now end in March 2023. The rules have been tweaked, however, to limit the new scheme to first-time buyers only; with price caps on the market value of homes being set according to a regional scale.
The chancellor announced that £500million would be made available for the Housing Infrastructure Fund, designed to enable an additional 650,000 homes to be built.
New partnerships with housing associations in England will also be established to deliver 13,000 homes, while guarantees of up to £1bn were made for smaller-house builders.
Other Key Points
- Work allowances for Universal Credit to be increased by £1.7bn
- An extra £500m for preparations for leaving the EU
- £900m in business rates relief for small businesses and £650m to rejuvenate High Streets
- An extra £20.5bn for the NHS over the next five years
- A minimum of £2bn extra a year for mental health services
- A £30bn package for England’s roads, including repairs to motorways and potholes
- 30% growth in infrastructure spending