For a combination of reasons, the 2016 Autumn Statement attracted more interest than other, ‘average’ Autumn Statements. There was plenty of speculation and curiosity about what it might contain with the post-EU referendum economic conditions and a new Chancellor of the Exchequer, in Philip Hammond.
Our solicitors have picked out six key points to explain a bit more about the impact the Statement is expected to have, and how its proposals might affect people.
Key Point 1: Reforms to whiplash compensation claims
Philip Hammond promised reforms to whiplash insurance claims, saying the government will aim to cut down on people fraudulently claiming insurance money for whiplash in 2017. He says that by doing this, motorists will save around £40 per year on their insurance premiums.
Gareth Naylor, Head of Personal Injury, says:
“As I understand it, the proposed reforms are not just for whiplash claims. The proposed reforms will also increase the small claims limit from £1,000 to £10,000, and to fix and limit the amount of damages an injured person receives. This means a solicitor can only recover costs on a case where damages exceed £10,000.
Imagine you have Mr Brown, an engineer, who trips over a defect and injures his back. He is absent from work for one month losing £1,000 and suffers intermittent back pain for two years. His claim is worth in the region of £5,000. He will be unable to instruct a solicitor.”
Key Point 2: Increase in Rural Relief Rates
There’s good news for the owners of small rural businesses with the announcement that the Rural Relief Rate will be increased from 50% to 100% in April 2017. This will equate to a tax break worth up to £2,900 for the businesses that qualify.
Jonathan Finn, Company and Commercial Solicitor, says:
“It does appear to be good news for a few rural businesses. Currently, village shops, post offices, public houses and petrol stations in rural areas that qualify for a 50% reduction in business rates will see this reduction increase to 100%.
“However, to qualify, the business must be located in a rural area with a population below 3,000 and must be the only business of its kind in the area so those who stand to benefit will be limited. That said, at least some attention has been paid to small rural businesses as the vast majority of government policy is geared towards cities and urban areas.”
Key Point 3: £1bn to be invested in start-ups
Small innovative businesses with the potential for growth will receive around £1bn of investment. This money will come from £400m to be ploughed into venture capital funds via the British Business Bank which is expected to unlock as much as £1bn.
Jenna Meehan, Company and Commercial Solicitor says:
“The Chancellor wants to put more money into developing managements skills in business and wants to help small start-up technology companies to develop and grow, rather than end up being incorporated into larger businesses. He has promised £1bn to help new companies scale up which is great news if you own a start-up business that you want to grow.”
Key Point 4: A ban on letting agency fees
There will be a ban on upfront fees charged by letting agents in England “as soon as possible” which will make it easier for tenants looking to rent a property. The government says this will stop tenants being hit with fees that average £223 per tenancy.
Steve Neale, Commercial Property Solicitor, says:
“There are currently 4.3 million families in private rented accommodation in the UK. Letting agents charge tenants a fee for a range of administration including reference, credit and immigration checks but the good news for tenants is that the government are going to ban these fees as soon as they possibly can, making it easier to rent a property. Charities have been campaigning for these fees to be dropped for some time, so the announcement has been well received by them and tenants alike.”
Key Point 5: Tax savings on salary sacrifice and benefits in kind to be stopped
Employees who are currently part of a ‘tax relief scheme’, where they sacrifice part of their salary in return for benefits such as gym memberships or health checks, will now have to pay to keep receiving these perks.
Yunus Lunat, Head of Employment, says:
“Larger companies have been offering employees benefits where they can forgo some of their salary in return for perks including health checks, gym memberships and mobile phones which they do not have to pay income tax on. Now, the end of salary-sacrifice tax benefits (with exceptions for ultra-low emission cars, pensions, childcare and cycling) means people will have to pay hundreds of pounds to get these same benefits, and employers may have to rewrite contracts for their staff. It’s one of the changes in this budget that critics are referring to as ‘stealth tax’.”
Key Point 6: Rise in insurance premium tax
Insurance Premium Tax (IPT), which is added to 50 million general insurance policies each year including those for cars, homes and private medical cover, will rise from 10% to 12% in June 2017.
Jonathan Robson, Commercial Litigation Solicitor, says:
“The increase in IPT will be felt by anyone who takes out a general insurance policy. Car drivers are likely to be most affected, with an average of £10 per year added to the average car insurance premium. The way it’s worked out means those with the highest insurance costs – young drivers and people living in London – will have to pay the most IPT, so it’s not good news for them.”
Summary of other key points
Philip Hammond’s first Autumn Statement will, it turns out, also be his last. He has scrapped the Autumn Statement so that there will only be one budget each year, to be announced in the autumn. Here are some other announcements you may have missed…
- Universal Credit taper rate cut – Universal Credit taper rate will be cut from 65% to 63% from April at a cost of £700m, with an estimated 3 million families keeping an additional 2p out of every pound that they earn. This is part of the Chancellor’s push to help ‘JAM’s, households who are: ‘Just About Managing’.
- Income tax thresholds to be raised – There are several changes to income tax including raising the level at which income tax rates ‘bite’ from £11,000 to £11,500 in April. The higher 40% rate income tax threshold will rise from £43,000 to £45,000. The Chancellor committed to raise these thresholds again to £12,500 and £50,000 respectively by the end of parliament in 2020-21.
For more information on what this Autumn Statement may mean for you or your business, please get in touch and speak to one of our solicitors.
