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29 October 2018

Chancellor tries to bring back the feelgood factor

The end of austerity has been declared as the Chancellor of the Exchequer prepared the nation for a “new chapter” ahead of Brexit.
 
In the final Autumn Budget speech before the UK begins the process of leaving the EU, Philip Hammond has announced an extra £500m towards helping UK government departments to prepare for Brexit, taking the total amount set aside for planning to £4.2bn.
 
James Rowbury, Investment Research Coordinator, said: “The Chancellor has laid out plans for a possible full fiscal budget in spring of 2019 as a precaution in the case of a no-deal Brexit.
 
“As we move into the final stages of negotiations, it was interesting to note there was relatively little discussion in the speech of Brexit’s consequences on the economy as the Chancellor tried to paint a positive picture.”
 
On a similar upbeat note, the Chancellor upgraded forecasts for GDP growth. He said that growth was forecast at 1.6% in 2019 - up from the 1.3% forecast back in March, 1.4% in 2020 and 2021, 1.5% in 2022 and 1.6% in 2023. 
 
James added: “Mr Hammond has said that, due to favourable Office for Budget Responsibility forecasts, the increase in the personal tax allowance pledged in the Conservative manifesto will be moved forward to April 2019. In conjunction, the change to the higher rate tax threshold also pledged will be moved to the same date.”
 
The personal tax allowance will be increased from £11,850 to £12,500 in April 2019. The higher rate tax threshold will rise from the current level of £46,350 to £50,000.
 
The government has also acted to overhaul tax rules to prevent the self-employed from avoiding paying national insurance contributions. James explained: “The Treasury will ensure any self-employed people operating as ‘personal service companies’ comply with the Inland Revenue tax rules, generating an additional £1.2bn per year for HM Revenue and Customs.”
 
Also targeted by the Chancellor to pay their fair share of tax were global tech giants. James said: “Following suit with the EU and Singapore, the Chancellor has also announced a Digital Services Tax, a tax on large digital platform corporations. The tax will be 2% on the revenues of digital businesses with global revenues in excess of £500m and is expected to generate a further £400m in tax revenues. Nevertheless, the tax will be a temporary measure and is subject to move in line with any Organisation for Economic Co-operation and Development agreement.
 
“It’s good to see fiscal stimulus back on the agenda, with the five-year spending plan now moving into positive territory, and government spending rising by an annual average of 1.2% over five years. Taxpayers should feel the benefits of bringing forward the personal tax allowance and the higher-rate tax threshold.”
 
Ends
 
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Chancellor tries to bring back the feelgood factor
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