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What the 2016 Autumn statement means for your finances

While this statement was focused on wider plans to shore up Britain’s “economic resilience” and improving productivity, there were a few things that will directly affect peoples’ pockets.

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Chancellor Hammond’s “first and last” Autumn Statement

This was Chancellor Phillip Hammond’s first Autumn Statement since he was appointed by Theresa May earlier this year, following the resignation of Prime Minister David Cameron and the replacement of his cabinet.

To make a break from his more dramatic predecessor Chancellor George Osborne, Hammond kept his speech short and announced this would be his last Autumn Statement, stating there is no need to have two budget statements each year.

The big headlines from this budget will be around the concerns raised about economic growth (in essence the ever present elephant in the room – Brexit) and the government deficit, but there are a few things that could directly affect your finances. We take a closer look.

A government-backed market-leading savings scheme

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Citing that while low interest rates were necessary to encourage growth and backing the Bank of England’s rate cut, Hammond acknowledged savers were being hurt by this situation.

To help savers he announced the creation of a new three-year National Savings and Investments (NS&I) Investment Bond available from spring 2017

The new bond will have a “market leading” rate of 2.2%. The bond will offer the flexibility to put away between £100 and £3,000 and be available to anyone over the age of 16.

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40,000 new starter homes to be built

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Hammond wanted “a housing market that works for everyone”, to this end he announced plans to spend:

  • £1.4 billion to provide 40,000 new affordable homes
  • £2.3 billion on a housing infrastructure fund

On top of this there was an extension to the number of right to buy homes, as well as a continuation of the help to buy equity loan scheme (though the deposit guarantee will be discontinued this year).

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Letting agency fees to be abolished

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In an attempt to address what Chancellor Hammond referred to as “market failure” and as a measure to help young and less well-off households, he announced that letting agents will no longer be able to charge tenants fees when they sign rental agreements.

The government is yet to confirm when this will come into effect.

Insurance Premium Tax will increase by 2%

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From 1 June 2017 insurance Premium Tax (IPT) will increase from 10% to 12%. IPT is a tax on insurers, it is up to them whether and how to pass on costs to customers. However, previous increases to IPT have resulted in increased costs for drivers.

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Pre-tax salary-sacrifice schemes banned

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In an attempt to raise tax receipts Chancellor Hammond has set his sights on salary sacrifice schemes employees exchange some of their salary for a non-cash benefit (such as gym membership).

So, as of April 2017, most salary sacrifice schemes will be subject to the same tax as cash income.

It will affect different types of salary sacrifice schemes differently, the following schemes will be exempt:

  • Ultra-low emission cars
  • Pensions, pensions advice
  • Childcare
  • Cycle to Work

Personal allowance raised

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The Chancellor kept his predecessor’s commitments to raising the amount of income you can earn before you start paying income tax.

The threshold is currently £11,000, and will rise to £11,500 in 2017-18, with the intention to eventually reach £12,500 before 2020, from there it will rise with inflation.

The point at which you pay the higher rate 40% rate of income tax will increase from £43,000 this year, to £45,000 in 2017-18.

Hammond stated there are plans to raise this to £50,000, but didn’t set a definite date.

Minimum wage raised

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The National Living Wage for those over 25 will increase from £7.20 per hour to £7.50 per hour, for other age groups the wage will also rise.

If you are aged:

  • 21 to 24, it will rise from £6.95 to £7.05 per hour
  • 18 to 20, it will rise from £5.55 to £5.60 per hour
  • 16 to 17, it will rise from £4.00 to £4.05 per hour
  • And for apprentices it will rise from £3.40 to £3.50 per hour

He also set aside £4.3 million to help small businesses understand the rules, as well as cracking down on employers who don’t pay the minimum wage.

£1 billion investment in digital infrastructure

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Hammond stated Britain needed “gold standard” broadband to help the economy grow, and he said the UK should become a “world leader in 5G”.

Government investment will support the private sector to roll out more full-fibre broadband, and there will also 100% business rate relief for companies working on full-fibre infrastructure.

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Crackdown on whiplash claims

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Hammond said there was a need to “end compensation culture around whiplash fraud”, announcing a crackdown on fake whiplash claims.

To this end he hiked the minimum level at which you can make a personal claim in the small claims court to £5,000.

The treasury claims this should cut premiums by around £40.

Investment in road infrastructure

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Chancellor Hammond pledged to spend £220 million to address strategic traffic pinch points around the country.

He mentioned an initiative to create an Oxford to Cambridge express corridor via Milton Keynes, as part of plans to encourage a new growth area between the two universities.

However, there are also to be major road improvement schemes in the north.

Freeze on fuel duty

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The Chancellor announced that fuel duty will be frozen for the seventh year in a row.

Hammond believes this should save the average car driver £130 and the average van driver £350, over the course of a year.

Have your say

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