Monday, 8 December 2014

Autumn Statement - Key Points

This week George Osborne delivered the Autumn Statement - an outline of the government's budget, and forecasts for the year. If you really, really want to, you can read the full Autumn Statement here, but I've summarised some of its key points


One of the biggest talking points was the overhaul of stamp duty.

What is stamp duty?
Stamp duty (or Stamp duty land tax - to give it its full name) is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay (MSE).

The stamp duty reforms will cut stamp duty for  98 per cent of homebuyers who currently pay it – which works out as a tax cut of £4,500 when buying an average £275,000 family home (Independent).This amounts to a total tax cut of £800million a year.

The new system
The new stamp duty bands
0 per cent for first £125,000 of house value
2 per cent on the portion up to £250,000
5 per cent up to £925,000
10 per cent up to £1.5million
12 per cent on anything above that

This replaces the 'slab' structure, under which homebuyers paid the relevant tax rate on the full value of the property.

Effects of the reforms
The new structure will benefit most people, but will mean that buyers of homes worth more than £937,500 pay more stamp duty than before. Mr Osborne gave the example of a person buying a £5m home, who will now pay £514,000 instead of £350,000.
This will provide a boost to the housing market, and estate agents have already reported increases in sales. 

Other key points in the Autumn Statement

  • Personal tax allowance rising to £10,600 next April instead of £10,500 as previously planned
  • Multinationals will now face a 25% tax on UK profits that are artificially shifted abroad (*cough* GoogleAmazonStarbucks *cough*)
  • Under 12s will be exempt from paying air passenger duty from May 1 next year. Under 16s will be exempt the year after
  • Student loans of up to £10,000 will be provided to postgraduates doing masters degrees
  • Corporation tax powers are to be devolved to Northern Ireland, and business rates for Wales are to be devolved to the Welsh Government.
  • Libor fines (read about the Libor scandal here)  will to go to emergency services, Gurkhas, £10m for veterans with hearing problems, new helicopters and VAT refunds for search and rescue
  • The economy is expected to grow 3% in 2014, higher than the 2.7% forecast in the budget (delivered in March 2014)
Why is the Autumn Statement important?
This is the final statement before May's general election. It was a chance to review the Spring budget, and potentially win over some new voters. Good news included "the fastest growth of any advanced economy in the world, falling unemployment and inflation [...] accompanied by the undoubted bad news about the state of the public finances. The deficit is not coming down at the speed the chancellor promised just a few months ago at the time of his real Budget." (BBC). This means that the government cannot really afford any major "giveaways", but, according to The Economist, Osborne makes up for this with his with "bold tax reform". 

The Autumn Statement in 90 seconds

Read More:
Gov.uk - Autumn Statement 2014: 16 things you should know
The Telegraph - Autumn Statement summary: Key points from the speech
The Independent - Stamp duty explained: Who does it affect, and what's the catch?
The Economist - ‘Tis not the season
The Gateway Online - 3 intelligent things to say about... the Autumn Statement

Priscilla

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