Before the Chancellor stood up, the thoughts were that, with the Brexit position still uncertain, surely there wouldn’t be much in it. Just over an hour later, all those thoughts had been dispelled.
The UK economy continues to grow, for an eighth consecutive year, whilst debt levels are falling, along with unemployment. As a result of this, Mr Hammond announced that the period of austerity is coming to an end and backed that up with a package of spending, the like of which we have not seen since the Conservatives came into power in 2010.
The NHS will receive an increased budget of £20.5 billion, after inflation, by 2023/24, with £2 billion per year being allocated to mental health. An extra £400 million is being given to schools this year, to help them buy the “little things”, £1 billion more on defence, £30 billion allocated to improve the roads (£420 million specifically for potholes), £1.7 billion to increase existing work allowances in Universal Credit, £650 million for social care and £1.5 billion to help the High Street.
With so much spending, you would think that taxes had to rise and valuable reliefs would be lost, but that doesn’t seem to have happened. In fact, the manifesto pledge of raising the personal allowance to £12,500 and the higher rate threshold to £50,000 is being delivered a year early from 6 April 2019. The annual investment allowance, whereby 100% relief is available on qualifying capital expenditure, is being increased from £200,000 to £1 million for the two years from 1 January 2019.
As always, the devil is in the detail and there were a few nasty surprises.
The period that qualifies for principal private residence relief after you move out is to be reduced again, from 18 months down to 9 months, whilst lettings relief will be reformed to only apply in shared occupancy situations. These measures are to be introduced from April 2020.
An immediate change applies to entrepreneurs’ relief where the individual must be beneficially entitled to 5% of the distributable profits as well as the capital, which has a significant impact on alphabet and growth shares. The qualifying holding period is to be extended from 12 months to 24 months for disposals after 5 April 2019. So, whilst not removing the relief completely, it is now harder to qualify.
Off payroll workers are still very much the target of this government, so the current rules that apply to the public sector (whereby they must decide whether or not to subject the payments made to the contractor to PAYE/NIC) will be extended to private sector companies from April 2020, but only for larger companies.
These measures, along with the digital services tax, are expected to generate over £1 billion extra revenues each year, once fully introduced.
The Chancellor is clearly banking on a positive Brexit deal. Whether he ends up regretting his decision to hold the Budget before the conclusion of those negotiations, remains to be seen.