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23 November 2017

Law Society (NI) Financial Advice comment on the Budget November 2017

If you’re a whiskey drinking, first time buyer living in London, then Wednesday’s budget has probably put a smile on your face.

For the rest of us however, you could be forgiven for thinking it was pretty much a non-event. As expected, the forecast for the UK’s future prosperity has been downgraded as a result of the Brexit vote and continued uncertainty over what life will look like outside the EU. In his first full Autumn Budget, The Chancellor was left with scarce wiggle room if he wanted to stick to his promise of keeping public spending in check to meet his fiscal targets. Below is a high level overview of some of the main points:

Stamp Duty waiver

The plan is to waive stamp duty tax on first-time homes up to £300,000 pounds in value. Sounds good, however almost a third of first properties sold in 2016 were below the stamp duty threshold according to Halifax’s First Time Buyer review. So 29% of people who bought their first home last year would have seen no benefit at all. Those in Northern Ireland, Scotland and the North of England are most likely to miss out. According to the same Halifax review, the average first time property in Northern Ireland sells for £ 115,269 – resulting in no stamp duty...

(A bit) more cash for the NHS

Following intense pressure to provide more funding for the NHS, Philip Hammond announced an extra £2.8bn of funding over the next three years. Critics have pointed out how short this falls when compared with the £4bn the health service’s own CEO said it required to look after patients properly next year. Furthermore, the payments are ‘one-off’ payments, not permanent additions to the NHS’s baseline budget.

Economic growth – downgraded

The OBR slashed expectations for growth this year from 2% to 1.5%, and their comments suggested that the future hardly looked bright. “The persistence of weak productivity growth does not bode well for the UK’s growth potential in the years ahead,” it said in a report published Wednesday.

While its expectations on the debt level have improved, prospects for the UK economy will depend on the impact Brexit will have on the UK, as well as on the feasibility of productivity recovering. The chancellor yesterday tried to address both with the limited headroom he had.

Brexit black hole?

Mr Hammond kicked off the Budget with a major spending pledge for the EU withdrawal process, announcing an extra £3bn is to be set aside for Brexit preparations over the next two years to allow for “every possible outcome” as it leaves the EU. This represents a massive boost to the £700m previously allocated, which is likely to instil confidence in pro-Brexiters preparing themselves for the possibility of leaving the EU without a deal. However, given the size of the sum being set aside to cover as yet unknown and undefined eventualities, it’s equally as likely to attract criticism.

Overall, assuming there are no U-turns in the coming days, Mr Hammond seems to have navigated his way along the precipice he was previously edging towards with no momentous fiscal announcements and without falling off. We expect this budget to have a bigger impact politically than it will on the economy – in fact, there was little in the budget for investors and markets have mostly responded with a collective shrug.

Financial Planning – Budget Opportunities/Threats?

In our role as the Law Society’s financial advice company we have highlighted the key changes that are likely to affect our clients:

· Personal Allowance to rise to £11,850 from April 2018 and the higher rate threshold going up to £46,350.

· Indexation allowance on capital gains within companies to be frozen as from January 2018. This point will have a potentially significant impact on those clients who hold assets within investment companies (FICs/ PICs).

· The chancellor doubled the amount that can be invested in an enterprise investment scheme (EIS) and still receive tax relief from £1 million to £2 million.

· Small businesses received a boost in the Budget as the government will bring forward the proposed switch to business rates from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) by two years.

With pensions left untouched (other than the expected increase to the Lifetime Allowance), and no mention of immediate changes to inheritance tax, a low-key Budget speech passed.

Law Society (NI) Financial Advice helping lawyers, their families and their clients. To get in touch E-mail or call 028 9023 0696.

· Law Society (NI) Financial Advice Limited is authorised and regulated by the Financial Conduct Authority.



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