From drinkers to EIS investors, there were a number of moderate winners in the Autumn Budget, as well a a couple of potential losers.
For Money Observer readers, the biggest win of this budget is not necessarily what the chancellor did, but more what he did not do. Despite concerns to the contrary, Philip Hammond declined to tinker too much with pensions.
As George Prior of Prior Consultancy noted: ‘Philip Hammond has done something extraordinarily positive in this Budget – he’s not tinkered with pensions to raise cash.’
Indeed, the largest change to pensions was broadly positive: the chancellor confirmed that the lifetime allowance for pension savings will increase in line with the CPI, raising the allowance to £1,030,000 for the tax year 2018/19.
When it comes to headlines, however, the winners at first glance appear to be first-time home-buyers, with the chancellor’s announcement that stamp duty for first-time buyers are to be axed from today.
The new rules mean that first-time buyers won’t pay stamp duty on properties over £300,000. On properties costing between £300,000 and £500,000, a 5 per cent stamp duty will be levied; it will amount to a £5,000 tax on a half million pound property.
The chancellor argued that this will help 95 per cent of first-time buyers, with 80 per cent paying no stamp duty at all.
When it comes to increasing the nation’s housing stock, the chancellor announced a few measures, both good and bad for homebuilders. ‘While the £44 billion of funding and loans remains largely “carrot” for housebuilders,’ notes Anthony Lynch, fund manager on JPM UK Equity Core fund, ‘the Chancellor did raise the potential “stick” of a review into land-banking.’
Changes to land-banking rules will potentially put pressure on the profits of homebuilders, negatively affecting their share price. A few hours after the Budget, Taylor Wimpey shares were down 1.27 per cent, Persimmon was down 1.83 per cent and Barratt Developments down 3.24 per cent.
Drinkers are clear, albeit small, winners of this unexciting Budget: duties on other ciders, wines, spirits and beer will be frozen, said Hammond.
This would lead to 12p off the price of a pint of beer and £1.15 off a bottle of whiskey in 2019, had the tax not been frozen. The freeze, Hammond said, was to preserve ‘great British pubs.’ Unrelated or not, pub chain Greene King was trading up by 1.07 per cent at 4pm 22 November.
Small businesses are also modest winners of the Budget, with the chancellor confirming that as of April 2018, business rates will be calculated by the lower CPI measure of inflation rather than RPI; however the difference stands at just 0.9 per cent (3 per cent vs 3.9 per cent).
Productivity has persistently failed to pick up since the financial crisis, meaning that the UK’s economic growth remains stubbornly low. The UK’s GDP was revised down by the Office for Budget Responsibility (OBR), from 2 per cent in the March Budget to 1.5 per cent in 2017. Not only that but it is expected to decline further to just 1.3 per cent in 2019/20 before picking up to 1.5 per cent in 2021.
‘Although GDP was expected to be revised lower, forecasts were not expected to be slashed to this extent,’ commented Kathleen Brooks, research director at City Index.
‘Still high inflation and an expected weakening in growth provide a potentially troubling backdrop for markets even without the political uncertainties created by Brexit,’ says Michael Metcalfe, global head of macro strategy for at State Street Global Markets.
Meanwhile, as expected, smokers lost out as tobacco duty was raised, although Imperial Tobacco shareholders hardly seem to care: as of 4pm 22 November, shares in Imperial were down by just 0.19 per cent.
Drivers of diesel cars that don’t meet the latest standards will have to pay a higher band of vehicle excise duty, while the diesel supplement for company car tax will increase by 1 per cent, as the chancellor increases taxes on diesel cars to fund the government’s Air Quality plan.
School pupils are to be tormented with a push to boost maths teaching through a package of measures for schools. Hammond describes knowledge of maths as ‘key to the high-tech, cutting edge jobs in our digital economy’.
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