George Osborne’s Autumn Statement and Spending Review on Wednesday 25th November was seized upon by some as a U-turn damaging his austerity credentials.
It was certainly surprising to hear the Chancellor reversing his Tax Credit proposals, offering significant incentives to home buyers and ensuring that pensioners continued to be treated as almost a special case – all made possible from reduced Government debt charges and increased tax revenues.
Poorer families in particular welcomed the reversal of the tax Credit announcement in July of this year. However, the pain has only been delayed rather than abandoned. Due to cuts made to Universal Credit, the benefit intended to replace tax credits by 2020, the Government still estimates that it will achieve the promised £12bn of welfare savings by the end of parliament.
House buyers were pleased also with an extension to the help to buy scheme, available to both first time buyers and home movers. For buyers in London the equity home loan scheme has been extended to 40% of the value of a new Build Property. Buyers can get equity loans of up to 20% of a new build property outside London.
The Government has also pledged to build 200,000 new ‘Starter Homes’ over the next five years. These are new build homes offered at a 20% discount to first time buyers meeting certain criteria.
Pensioners will see a 2.9% rise in State Pension to match the rise in earnings, which is the highest real terms increase in 15 years with the new basic state pension set at £119.30 per week.
Unfortunately the announcements were not all good news. An increase in Stamp Duty Land Tax (SDLT) will be introduced from 1st April 2016 for people buying second homes or ‘buy to let’ properties. This is an additional 3% charge on any property worth over £40,000, effectively raising the SDLT charge on a £250,000 property from £2,500 currently, to £10,000 after 1st April 2016.
The announcement that measures would be introduced to end the right to cash compensation for minor whiplash injuries has received a mixed reception. There will be a consultation on the details in the New Year and the Government expects the saving to be passed on by insurers, reducing annual insurance costs for drivers by between £40 and £50 a year.
Overall then, a welcome Christmas bonus for poorer families but middle England may feel a little less pleased.
Ashley Partridge. Trusts and tax administration department.
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