The Autumn Statement 2013 - Expert Analysis, Commentary and Opinion

On 5th December 2013, Chancellor George Osborne delivered his Autumn Statement which outlined the state of the UK economy and provided an update on the government's planned spending and taxation plans for 2014 and beyond.

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The Headline Announcements included:

  • Confirmation that the personal income tax allowance is set to rise to £10,000 from April 2014.
  • A cut in Employer National Insurance Contributions for those under 21
  • Changes to taxation rules for Partnerships
  • A cap on the annual business rate rise at 2% and the introduction of a 're-occupation relief'
  • Changes to capital gains tax rules for residential property

In his speech, George Osborne made little reference to the finer details surrounding various new policies, particularly with regards to the changes in taxation rules for Partnerships and the changes to capital gains tax rules for residential property. 

Now that Mitchell Charlesworth's experts have had a chance to delve beyond the headline speech announcements, we are able to bring you more comprehensive analysis of the main policies outlined in this year's Autumn Statement:

1. AS 2013 - The Impact on Businesses (view the analysis here):

  • Cut in Business Rates
  • Employee Ownership
  • Employer National Insurance Contributions Cut for Under 21s
  • Targeting of Charities Established for Tax Avoidance Purposes

2. AS 2013 - What it means for Individuals (view the analysis here):

  • Tax Allowances and Tax Reliefs
  • Benefits and Pensions
  • Increase in the State Pension Age
  • Personal Allowance Changes
  • Transferable Personal Allowance for Married Couples
  • Changes to the UK Capital Gains Tax Regime (targeting non-UK residents and private residence relief changes)
  • Personal Finances - Fuel Duty, Rail Fares, Car Tax Discs and School Meals)

3. AS 2013 - Partnerships & Targeting the Manipulation of Profit and Loss Allocations (view the analysis here)

The Autumn Statement 2013 – Summary of Headline Announcements:

“Britain’s economic plan is working. But the job is not done.” - George Osborne

“We seek a responsible recovery. One where we don’t squander the gains we’ve made, but go on taking the difficult decisions.” - George Osborne

Growth Forecasts and Figures:

  • The Chancellor announced that growth forecast for this year has increased from 0.6% to 1.4%. It is also revised up for next year from 1.8% to 2.4%, and also up for the following four years to 2.2%, 2.6%, 2.7% and 2.7%.
  • Employment is at an all time high. The total number of jobs are expected to rise by 400,000 this year and unemployment benefits claimants are down 200,000.

Government Borrowing:

  • UK underlying deficit  revised down to 6.8% this year, and is expected to fall to 4.4%, 2.7% and then  1.2% by 2017/18. The OBR predicts there will be a small cash surplus in 2018-19.
  • Government departmental budgets are to fall by about £1bn next year and the year after.

Benefits and Pensions:

  • As widely predicted, the state pension age is to increase earlier than previously announced. That is; to 68 in the mid-2030s and to 69 in the late 2040s.
  • Pensioners will now be allowed to pay voluntary NICs to boost retirement incomes.
  • In April 2014, the state pension will rise by £2.95 a week to £113.10 (The state pension increase is the highest of CPI inflation in September, average wage rises, or 2.5%. This year, CPI inflation was the highest of the trio.)
  • Some changes to Pensions Tax Relief had already been announced but will take effect from April 2014. The lifetime allowance being lowered from £1.5m to £1.25m and the annual allowance is to be cut from £50,000 to £40,000.

Tax, Allowances and Tax Reliefs

  • The personal income tax allowance is set to rise to £10,000 from April 2014, and then from 2015-16 to increase by the Consumer Prices Index (CPI) measure of inflation. This had previously been outlined by the Chancellor in the Budget 2013.
  • It was announced that from April 2015, capital gains tax will be imposed on future gains made by non-residents who sell residential property in the UK to make the situation fairer for UK residents.
  • The rate of the bank levy will rise to 0.156% and will raise £2.7bn in 2014-15. George Osborne also announced that £100m of LIBOR fines will go to armed forces charities.
  • Stamp duty on shares purchased in exchange traded funds are to be abolished.
  • As widely predicted, a transferable tax allowance for married couples and civil partners is set to be introduced in April 2015, benefitting eligible couples by up to £200 but will cost around £700m a year.

Help for Businesses:

  • “The best way to help businesses is by lowering the burden of tax” - George Osborne
  • The annual business rate rise will be capped at 2%, rather than at the rate of retail price inflation – RPI - (which is currently 3.2%). This will now also be payable in monthly instalments.
  • The Chancellor also made a previously unknown announcement that businesses moving into vacant properties will have their rates cut by 50%, known as ‘re-occupation relief’.
  • National Insurance Contributions will be scrapped for under-21s earning below £813 per week. This should make it cheaper for businesses to employ young people.
  • The Chancellor plans to introduce a £1,000 business rates discount to help the high street.
  • The Small Business Rate Relief has been doubled for a further 12 months from 1 April 2014 to help 540,000 firms.
  • Boost in start-up loans scheme aiming to help 50,000 more people start their own businesses.
  • The government plans to provide an extra £40 million to increase the number of people starting higher apprenticeships by 20,000.

Further Education:

  • A cap on the numbers of students England's universities can admit is to be lifted in 2015. In 2014, universities in England would be able to admit an extra 30,000 students.
  • Extra funding to be provided to science, technology, and engineering courses.
  • The government plans to finance new loans by selling the old student loan book.

Fuel Duty, Rail Fares, Car Tax Discs and School Meals:

  • The September 2014 fuel duty rise of 2p per litre has been cancelled.
  • Regulated rail fares increases for 2014 will be capped in line with the Retail Prices Index and not 1% above RPI as planned.
  • The paper tax disc, that has been in existence for 93 years, and shows whether motorists have paid vehicle excise duty,  is to be replaced with an electronic system.
  • Free school meals will be extended to all children in reception and years 1 and 2. This is expected to cost around £600m a year.

Infrastructure and Spending:

  • The Chancellor has pledged to provide £1bn of loans to unblock stalled residential developments particularly in Manchester and Leeds.
  • The Government plans to boost investment in shale gas by offering a tax relief on early profits of up to 50%.

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