A Chancellor’s Statement with few announcements
15th March 2018
Chancellor Philip Hammond has delivered his Spring Statement 2018, and on his promise to move away from two major fiscal announcements every year. There was no red briefcase, no red book, and no tax changes as the chancellor announced updated economic forecasts in a speech lasting less than half the length of any of his previous statements.
Hammond moved the Statement to a Tuesday, rather than keeping it in its usual slot straight after prime minister’s questions on a Wednesday. Far from being a second financial statement of the tax year, the chancellor unveiled the latest economic forecasts alongside a raft of consultations.
The Office for Budget Responsibility (OBR) revised its forecast for growth up to 1.5% – a rise of 0.1% on the previous forecast announced in Autumn Budget 2017. However, GDP is expected to fall back to 1.3% in 2019 and 2020 as the OBR left its November 2017 forecast unchanged.
Borrowing fell to £45.2 billion in 2017/18 – £4.7 billion lower than the OBR’s forecast in November 2017, while Hammond confirmed any further borrowing is expected to fund capital investment only. Debt is also expected to start falling as a share of GDP in 2018/19, according to the OBR.
Aside from updated economic forecasts, the rest of the chancellor’s attention focused on policy consultations – some new, others previously announced. These consultations may feed into the Autumn Budget 2018.
DIVIDENDS: The tax-free dividend allowance will reduce from £5,000 to £2,000 from 6 April 2018.
INCOME TAX RATES: The bands and rates at which people in Scotland pay income tax have been changed for 2018/19, but it will be business as usual for taxpayers in the rest of the UK.
AUTO-ENROLMENT: Businesses need to be aware that from 6 April 2018, the minimum employer contribution towards an employee’s workplace pension will increase from 1% to 2%. These contributions are usually mandatory for workers aged between 22 and state pension age, earning more than £10,000 a year.
NATIONAL LIVING WAGE AND NATIONAL MINIMUM WAGE: National minimum wage rates for all ages and apprentices are increasing from 1 April 2018. For 18 to 20-year-olds and 21 to 24-year-olds, it will be the largest increase in a decade. National living wages and national minimum wages rates:
• 25 and over - £7.83
• 21-24 - £7.38
• 18-20 - £5.90
• Under 18 - £4.20
• Apprentice* - £3.70 (* If under 19 or in first year of apprenticeship).
PENSIONS: Pensions escaped an overhaul in Autumn Budget 2017 as the chancellor opted to leave the current system unchanged, apart from an increase to the lifetime allowance. The lifetime allowance, which is the maximum amount an individual can draw from pensions without incurring extra tax charges, rises to £1.03 million from 6 April 2018.
ISAs: The overall annual ISA subscription limit remains at £20,000, although the Junior ISA allowance increases to £4,260 from 6 April 2018. The £20,000 limit may also be used to invest in a Lifetime ISA, which has a maximum allowance in 2018/19 of £4,000.