2018 Autumn Budget – What You Need To Know

 
Published: 1st November 2018

 

This week, Chancellor Philip Hammond delivered a budget to take us towards Brexit and ‘the end of austerity’, which he claimed will prepare the country for a ‘new chapter’ for the economy.
 
He painted a picture of the UK economy in not too bad shape, with predicted growth upgraded from 1.3% to 1.6%, and an unexpected windfall from a boost in tax revenues and lower than anticipated spending by local authorities. As a result, the key themes of his budget were tax cuts and increased spending on public services – including health, schools and roads. However, he warned that his Autumn budget is dependent on a Brexit deal; but if negotiations fail, he would need to implement an emergency budget in the Spring.
 
So was this intended to be a Brexit confidence booster? Or an insurance budget, designed to win votes if a general election were to follow a no-deal exit?  Let’s find out what the 2018 budget means for you…
 
 
 

Key Points at a Glance

Tax cuts – Personal Allowance and higher rate tax threshold raised
Low earners – minimum wages increased
Benefits – extra funding to ease the transition to Universal Credit
Public services – more money for NHS, schools, defence and roads
Transport – new railcard for 26-30’s
Housing – Stamp duty relief for first-time buyers extended to shared ownership homes
Business owners – help for the High Street with cuts to business rates
 

 

Employees/Self-Employed – Income Tax Cuts

The tax-free Personal Allowance will rise to £12,500 (up from £11,850 currently).
This is the amount you can earn before you pay any income tax.
 
The threshold at which you start paying higher rate income tax (40%) will be raised to £50,000 (up from £46,350).
So for higher earners, an extra £3,650 will be taxed at the basic rate (20%) rather than the higher rate (40%).
 
When?  From April 2019 (that’s a year earlier than originally planned)

 

What do the tax changes mean?

Most people will pay less income tax from next year. However National Insurance thresholds will also change, which cancels out some of the tax gains for higher earners.

The tax system is complex and individual circumstances will be affected by various factors including student loan repayments and pension contributions, but for the average taxpayer, this shows the combined effect of changes to the Personal Allowance, tax thresholds and National Insurance:

If you earn £12,500 – £50,000, you will pay basic rate tax (20%) and pocket an extra £155 take-home pay each year.

If you earn £50,000 – £100,000, you pay higher rate tax (40%) and gain an extra £566 a year.

For more details, see Budget 2018: Most to pay less income tax from April – Money Saving Expert

 

Income tax in Scotland

Note that Income Tax rates are different in Scotland and any changes will be announced in the Scottish budget in December.
 
 
 

Low Earners

The National Living Wage increases from £7.83/ hour to £8.21/ hour, which brings in an extra £690 a year for a full-time worker. The Government aims to get the wage to £9 by 2020.

 

 

What is the National Living Wage?

The lowest wage that can legally be paid to employees aged 25+.
It is reviewed annually and is supposed to reflect the amount someone needs to earn to cover the basic costs of living and lead a decent life.

 

 
The National Minimum Wage (paid to Under 25’s) also goes up:
 

21-24 year olds 18-20 year olds 16 & 17 year olds Apprentices
£7.70/ hour £6.15/ hour £4.35/ hour £3.90/ hour

 
When?  Changes apply from April 2019
 
Check here to see if you’re earning the legal minimum, or if you’re owed payments from past years.

Note most interns should be paid at least the minimum wage, whatever the length of your internship. If there are any problems, you should take it up with your employer in the first instance, and if it remains unresolved, get advice from Acas, or report it to HMRC, who will investigate.
 

 

Benefit Claimants

The Chancellor promised £1 billion extra funding over five years, to ease the Universal Credit transition.

 

 

What is Universal Credit?

It constitutes a major reform to the way benefits are paid to people on a low income or who are out of work.  Universal Credit replaces 6 benefits, merging them into one monthly payment (Income Support, income-based Jobseeker’s Allowance, income-related employment and support allowance, Housing Benefit, Child Tax Credit and Working Tax Credit).

 

 

What is the problem?

The new system is gradually being rolled out across the UK, but many claimants have had a difficult time moving from their former benefits to Universal Credit. Typically, people have waited 6 weeks for their first payment, meaning many were getting into serious debt and rent arrears; the investment should help to speed up and top up payments, to ease the rollout in the months and years ahead.
 

 

Public Services

The Chancellor claimed that the ‘era of austerity is finally coming to an end’ and pledged increased spending on public services.

 

 

What is Austerity?

This refers to the government policy in operation since 2010, which involved cuts to public expenditure – including health, transport, local government and benefits – at the same time as tax increases.

 

 
 

NHS

The Government promised an extra £20.5 billionn for the NHS over the next five years. £2bn will be invested in improving mental health support, including young peoples’ crisis teams all over the country and a new 24-hour mental health hotline.
 
 

Roads

£28.8 billion has been set aside to upgrade and maintain motorways and other major roads. Local councils will receive a further £420m to tackle potholes, bridges and other repairs, made necessary by last year’s extreme weather conditions.
 
 

Schools

Schools have been given a £400million one-off capital payment to help buy equipment, worth an average of £10,000 per primary and £50,000 per secondary school.
 
 

Defence

There’s an additional £1 billion on the defence budget, particularly for cyber warfare and counter terrorism.
 

 
 

Commuters

New 26-30 Railcard
A new £30 digital railcard offers discounted train travel for 26-30’s. An extension of the current young person’s railcard (16 to 25 year olds), it saves you 1/3 on most off-peak rail fares, but can’t be used on season tickets.

When? Originally piloted last year, the new railcard will be available across the country before the end of the year.

Find out more: 26-30 Railcard

 

 

Drivers

Fuel duty has been frozen (for the 9th year).
 

 

Drinkers

Duty on beer, cider and spirits will be frozen.
But from February 2019, the duty on wine will rise in line with inflation (RPI), adding about 8p a bottle.
 

 

Smokers

Tobacco duty will increase by inflation (RPI) + 2%, which will add about 28p to a pack of 20 cigarettes.
 

 

Homebuyers

Stamp Duty
 

 

What is stamp duty?

Stamp duty land tax is a lump-sum tax paid when you purchase a property or land, costing above a set amount. The tax rate depends on the price and type of property, where it is in the UK, and whether you’re a first time buyer.

 

 
In the last budget, stamp duty had already been scrapped for most first-time buyers, and the exemption now also applies to shared ownership homes worth up to £500,000.
 
When? This change takes effect immediately, and will also be backdated to last year’s Budget, so you should be able to claim back the money if you purchased a property since November 2017.
 

Single houseStamp duty relief:

 

No stamp duty for first-time buyers on homes under £300,000

 

To help those buying in London and other expensive areas, for properties costing up to £500,000, no stamp duty on the first £300,000; normal rates of stamp duty apply above that (currently the remaining £200,000 incurs 5% tax)

 

No stamp duty for first-time buyers of shared ownership properties valued up to £500,000

 
Use this stamp duty calculator to work out how much you have to pay on a property.

 
It’s important to note the definition of first-time buyer:
Someone who has never owned/part-owned a property anywhere, whether bought or inherited.
You don’t qualify for the first-time buyer rates for buy-to-let purchases, only if the property will be your main residence.

 

Stamp duty in Scotland

In Scotland, stamp duty is now called Land and Buildings Transaction Tax (LBTT). Details can be found here.
 
 
Help to Buy Scheme

The Government’s Help to Buy Equity Loan scheme will be extended by 2 years to 2023, but it will be limited to first-time buyers purchasing new homes. Also, new regional price caps will be introduced, which will lower the maximum value of homes that can be bought under the scheme.

Find out more: Help to Buy Equity Loans – GOV.UK

 

 

 

Business Owners

 
Help for the High Street
Business rates for small retailers have been cut by a third for the next two years. The Government estimates that will save up to £8,000 a year for 90% of independent shops, restaurants, cafes and pubs.
 
 
Clamp down on Digital Giants
At the other end of the scale, Philip Hammond is planning a digital platform tax aimed at multinational web giants like Google, Amazon and Facebook, to make sure they pay fair tax on profits from UK business. It should take effect in 2020, raising around £400m a year.
 
 
 

Plastics Tax

In a world-leading move to combat plastics pollution, the Chancellor will bring in a tax on the manufacture and import of plastic packaging that contains less than 30% recycled materials.

This follows the 5p charge on plastic bags introduced in 2015, which has successfully cut sales of bags by 86% and reduced the amount entering the environment.

He confirmed the Government’s commitment to sustainable packaging and recycling, but his environmental efforts fell short of launching an anticipated ‘latte-levy’ on the 2.5 billion plastic cups we chuck away each year.
 
 
 
Brexit coin

And Finally….a New Brexit Coin

A commemorative 50p coin will be introduced on 29th March 2019, to mark Britain leaving the EU.

Photo: Mail Online

 
 
 

How will the 2018 Budget Affect You?

Use this calculator to find out the impact on your pocket from the new Budget measures:

Budget 2018: Richer or poorer? Ask the calculator – BBC
 
 
 
Sources:

Budget 2018: Wages, mental health support and universal credit – BBC

Budget 2018: What it means for you – BBC 

Budget 2018: What you need to know, incl changes to tax, benefits, Premium Bonds & more – Money Saving Expert 

 

 

 

Featured