Autumn 2018 Budget – Overview

Introduction A Budget for “Strivers, Grafters and Carers” Budgets, as we all know, take place on Wednesdays. After the...

Autumn 2018 Budget – Overview

Introduction

A Budget for “Strivers, Grafters and Carers”

Budgets, as we all know, take place on Wednesdays. After the excitement of Prime Minister’s Questions, the Deputy Speaker calls ‘the Chancellor of the Exchequer’ and he – so far we have not had a female Chancellor – bounds to his feet, delivering an upbeat message about the nation’s finances and pouring scorn on Her Majesty’s Opposition in equal measure.

Most people had been expecting this year’s Budget to be in November. The Budget has been brought forward to avoid being enmeshed in the latest rounds of Brexit negotiations. So why not Wednesday, October 31st? The newspapers are convinced that Philip Hammond did not want to give their headline writers an open goal by presenting a Budget on Hallowe’en and so Monday it was.

The Economic and Political Background

When he was Chancellor, George Osborne constantly repeated the mantra that whatever he did as Chancellor, far bigger forces were acting on the UK economy. We can see that all too plainly at the moment with the continuing trade war between the US and China which – with both Donald Trump and Xi Jinping seemingly holding entrenched positions – shows no sign of ending soon.

Closer to home, a stand-off is developing between the EU and the Italian government over Italy’s budget. In simple terms, the Italian government want to kickstart the economy – which has barely grown for ten years – with a programme of public spending. The EU has vetoed the plan and, with some of the Italian banks still in a parlous state, any further deterioration in the situation could have ‘ripple’ effects across the continent.

At home, the news for the UK economy has been reasonably good over the last three months. True, the retail sector is shrouded in almost daily gloom, but unemployment continues to fall. Inflation, as measured by CPI, has just come down to 2.4% and recent figures showed UK wages increasing at their fastest rate in a decade, meaning that people may finally feel better off in real terms.

And, of course, this will be the last Budget before the UK is due to leave the European Union on March, 29th next year, although no deal with the EU has yet been reached. The Treasury has been at pains to stress that all spending commitments contained in the Budget are ‘already funded’ irrespective of whether the UK leaves the EU with or without a deal – although the Chancellor had previously warned that leaving without a deal may mean another Budget. Just when you thought he’d finally sorted out his Spring Statements and his Autumn Budgets…

The Speech

Normally, the Budget speech starts at around 12:30 – but given that the speech was on a Monday, consideration obviously had to be given to MPs making the journey back to Westminster from their constituencies.

The Chancellor therefore got to his feet at 3:33pm and immediately ticked the “hard working families” box. If he said “the hard work of the British people” once in his speech, he said it a dozen times. He was determined to repay the trust of the British people and deliver a Budget for “strivers, grafters and carers.”

He was also quick to assert that “austerity was coming to an end” – in truth, Theresa May’s speech at the Conservative Conference had given him little alternative.

Hammond commented on eight straight years of growth in the economy and that 3.3m more people were now in jobs since the Conservatives had come to office. There was the ritual taunting of the Opposition and – delivering his last Budget before Brexit – the Chancellor seemed to be relishing the ‘dividend’ it would give him.

He was confident of a successful deal being reached with the EU but was nevertheless preparing for “every eventuality” with an extra £500m going into Brexit preparations, whilst retaining what he termed “fire power”, should the economy need it post-March next year. He also made clear that, if necessary, next year’s Spring Statement could become a “full fiscal event.” Or in simple terms, ‘no deal might mean another Budget.’

The preliminary skirmishes over, he launched into what you suspect is his favourite part of the speech: the numbers.

The Numbers and the Forecasts

The ‘numbers’ come from the forecasts of the Office for Budget Responsibility (OBR) and the figures and forecasts were all, in the main, better than those the Chancellor had forecast in the Spring of this year. Inflation is forecast to average 2% next year which means that most people should see real growth in their wages.

There was also a prediction of 800,000 more jobs to be created in the economy over the next five years (as a comparator to that figure, the UK economy added 338,000 full time jobs last year) and the OBR forecasting real wage growth in each of the next five years.

Growth for next year was forecast to be 1.6% (compared to the 1.3% forecast in the Spring) followed by two years at 1.4% then 1.5% in 2022 and 1.6% in 2023. Given that the OBR has been 0.3% out over the course of the last six months, you have to take those figures with a pinch of salt and – as we commented above – events in the wider world have the potential to play havoc with the predictions.

For now though, the Chancellor is optimistic, with debt and borrowing both forecast to fall steadily. Debt will fall to just under 1.4% as a percentage of Gross Domestic Product next year, and then to 0.8% of GDP by 2023-24. Government borrowing was forecast to fall to £31.8bn in 2019/20, to £26.7bn in 20/21 and then to £23.8bn in 21/22. These reductions would, Hammond said, allow him to spend significant sums on public services, as “sound finances are not an end in themselves.”

The Money for Public Services

The Chancellor devoted a good deal of his speech to detailing the money that was now available for the public services which would, he said, see public investment growing to its highest sustained level for 40 years. The measures included:

  • A commitment to spend £84bn on the NHS over the next five years. The NHS, said the Chancellor, remained “the number one priority for the British people.”
  • There would be additional money for the local government’s social care budgets: £650m in grant funding plus £45m for care of the disabled and £84m for children in social care.
  • In what was seen as a big win for Defence Secretary Gavin Williamson, an extra £1bn was allocated to the armed forces to help with ‘immediate pressure’ – especially in cyber security and anti-submarine capabilities.
  • There was no new money for the police force – that buck was passed to the Home Secretary’s upcoming review of police funding – although an extra £160m was allocated to counter-terrorism policing over the next two years.
  • The Chancellor also announced that having “far less borrowing than expected” would allow the Treasury to make a donation of £10m to the Armed Forces Covenant Fund Trust to help veterans with mental health needs. There would also be a fund of £1.7m for educational programmes regarding the liberation of Belsen, as the 75th anniversary of the end of the Second World War approaches.
  • He also announced an additional £400m for schools – amounting to £10,000 per primary school and £50,000 per secondary school – to allow the schools to buy the “little extras” that the normal school budget did not stretch to.
  • And finally – as had been widely trailed – he came to potholes, with the decision to give £420m to local councils to tackle the growing number of potholes on local roads, which is on top of an existing fund of £300m.

Personal Taxation and Allowances

What The personal allowance will rise to £12,500 per year (up from the current £11,850) and higher rate tax will now start at £50,000 per year (up from the current £46,350).
When From April 2019
Comment The Chancellor made reference quite early in his speech to the fact that “every Chancellor likes to have a rabbit or two in his hat” and, as he reached the very end of his Budget, this appeared to be one of his.

A commitment in the Conservative’s manifesto was that these allowances would come in by April 2020. The changes – which will benefit 32m people according to the Chancellor – will now be introduced a year early.

This allowed the Chancellor to repeat his opening remarks that “the hard work of the British people” through the austerity years was paying off and that he was putting “hard cash in their pockets.”

What Tightening the rules on Entrepreneurs’ Relief.
When From April 2019
Comment There had been suggestions that the Chancellor would scrap the Entrepreneurs’ Relief but, with the Chancellor wanting the UK to be a leading player in global technology, he has instead decided to extend the qualification period from 12 months to two years.

Pensions and Savings

What Lifetime allowance for pensions.
When From April 2019
Comment Whilst the Chancellor’s speech was thin on the ground when it came to pensions, there were some small nuggets within the full Budget publication.

The lifetime allowance for pensions benefitted from a rise, if only a minor one. The allowance will increase in line with CPI in April 2019 to the new amount of £1,055,000, from the current £1,030,000.

What Pensions for the self-employed.
When Paper to be published in Winter 2018
Comment This is a case of a review, following a review, which will, we assume, eventually lead to new policy.

The Budget publication announces that, later this year, we will see the results of the Department for Work and Pensions paper on ‘increasing pension participation and savings persistency among the self-employed’. This follows the 2017 review into automatic enrolment and how the self-employed could be encouraged to further consider their arrangements for retirement.

What The Pensions Dashboard.
When Extra funding in 2019-2020
Comment The forthcoming Pensions Dashboard promises a vision by the government to allow all of us to view all our pension savings in one place, including both personal and state pensions.

The dashboard again features in the Budget, with a further £5m available during the next tax year to find out ‘how an industry-led approach could harness innovation while protecting consumers‘.

With that being the sole announcement regarding the dashboard, however, it feels as though the final product could still be some way from making it onto our computer screens.

What ISA and Junior ISA limits.
When From April 2019
Comment The adult ISA allowance for 2019/20 was frozen at £20,000 but the Chancellor opted to increase the Junior ISA allowance in line with CPI to £4,368.
What Rates on National Savings & Investments’ index-linked savings certificates.
When From May 2019
Comment NS&I’s index-linked savings continue to be popular, with just over 500,000 customers investing £19.9 billion in the certificates. In line with successive government’s policies, savers will see their interest linked to the CPI, instead of the usually higher RPI figure, for certificates entering a new term from May 2019. The move is designed by the government to ‘reduce its inflation exposure’. CPI currently stands at 2.4% and RPI at 3.3%.

Business Investment and Business Taxation

What A new digital services tax.
When From April 2020
Comment Philip Hammond has spoken of creating ‘a level playing field’ between the high street and online retailers in previous Budgets and speeches and there were early rumours that he would impose a ‘digital services tax’ on companies like Amazon and Facebook.

The Chancellor stated that the UK was working towards a global agreement to make sure that such companies pay their fair share of tax, but that progress was “painfully slow.” He therefore announced that the UK would “go it alone,” introducing a digital services tax levied on companies with more than £500m in global revenues.

It was not, he again stressed, “an online sales tax” and he expected the tax to generate £400m per year.

What A reduction in business rates.
When From April 2019, for two years
Comment The Chancellor appears to have opted for a package of reliefs to the high street, with a £1.5bn boost going to small retail businesses – those with a rateable value of less than £51,000.

Part of this pot will go to a “Future High Streets Fund” for councils to plan for transforming town centres. The headline though is that there is around £900m of savings in business rates relief for nearly 500,000 small businesses, with the Chancellor cutting business rates by a third for the next two years.

The move would, the Chancellor said, see annual savings of up to £8,000 for 90% of small businesses. In widely-trailed examples, a pub in Sheffield with a rateable value of £37,750 will save £6,178 in business rates next year: a newsagent in Birmingham with a rateable value of £14,250 will save £1,749.

There were some fairly immediate questions about whether this was the measure the high street had asked for. Clearly, shops like Boots, Debenhams, M&S and WH Smiths are under huge pressure at the moment: but they have larger premises and appear unlikely to benefit from these changes.

What Off payroll working in the private sector (IR35).
When From April 2020
Comment Again, the move to “clamp down on the fake self-employed” and bring the private sector in line with the public sector had been widely trailed, with the Chancellor declaring that there was “widespread abuse in the private sector.” But any potential change was delayed until April 2020 and it would then, in any case, only apply to “large and medium sized companies.”

This change places responsibility for operating the off-payroll working rules on the organisation rather than the individual contractor.

What Annual Investment Allowance (AIA) increased to £1 million.
When For investments between 1st January 2019 and 31st December 2020.
Comment The AIA currently stands at £200,000: an increase is welcome news for businesses. It’s assumed that this aims to stimulate business investment during a period of Brexit uncertainty.
What Introduction of a new structures and buildings allowance.
When Immediately
Comment Any contracts entered into for construction on non-residential structures and buildings will be eligible for a 2% capital allowance. This move comes into play immediately and so will apply to any project where all the contracts for work began on or after 29th October 2018.
What Capital allowances special rate reduction.
When From April 2019
Comment The capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6% to more closely match average accounts depreciation.

Tax Avoidance and Evasion

The Chancellor declared that since 2010, measures against tax avoidance and evasion had secured £185bn in “money that would otherwise have been lost.” He then quietly slipped in that HMRC would now become a preferential creditor in company insolvencies. The proof of this pudding will be in the eating, but could this be a move which sees the Revenue more willing to push companies into liquidation?

Investment in the Economy

As George Osborne had done so often in his speeches, Philip Hammond sought to ‘solve the productivity challenge’ – why the UK’s productivity lags so far behind that of other leading industrialised nations. He announced £1.6bn of new investment in the government’s industrial strategy and £150m for fellowships to attract the “brightest and best” to the UK. He also said that over the next five years, public investment would rise by 30% as the Government invested in the UK’s “roads, railways, research and digital infrastructure.”

“The engine of growth is enterprise,” said the Chancellor, as the UK looked to build the ‘high wage, high skill’ economy of the future. Not for the first time, a Chancellor announced that “Britain is open for business” – specifically that e-passport gates would now be open to visitors from the USA, Canada and Australia, described on the BBC as ‘an interesting gesture to post-Brexit Britain.’

There would be £200m extra funding for the British Business Bank (to replace access to the European Investment Fund, should it be needed, post-Brexit) and more money for benefits claimants who wanted to start their own business.

No Future PFI and PF2 Schemes

He gave a commitment that – despite its enormous cost – the government would honour existing commitments to Private Finance Initiatives (PFI) and PF2 schemes but firmly committed to no further schemes. Instead, he said, the government would establish a ‘centre of excellence’ for managing such contracts, starting with the NHS.

“Our Future VAT Regime”

The veiled threat to reduce the VAT threshold remained, with the Chancellor saying that the Treasury “continued to work on it.” He did, however, give a commitment that the threshold would stay at its current level of £85,000 for the next two years.

Other Measures

What An increase in the National Living Wage (NLW) from £7.83 per hour to £8.21.
When From April 2019
Comment This is an increase well above the rate of inflation. Clearly it will be warmly welcomed by those on the NLW (as there will be proportionate increases for younger employees as well).

Green Measures

Would we get a coffee cup tax? No, we wouldn’t. Clearly the Chancellor could see the ‘Scrooge Hammond taxes your cappuccino’ headlines all too clearly. Instead there would be up to £10m available to help clear up abandoned waste sites and a proposed new tax, subject to consultation, on the manufacture and import of plastic which is less than 30% recyclable.

Money for Cities

There were large amounts of money doled out to Scotland, Wales and Northern Ireland. Then again, given the pivotal position of the DUP, an extra £320m to Northern Ireland was hardly surprising. There was also a promise of an extra £950m for the Scottish Government by 2020/21 and £550m for the Welsh Government. There was an increase in the Transforming Cities Fund to £2.4bn, with additional money for the Universities Enterprise Fund, the Digital Catapult Schemes in the North East, South East and Northern Ireland and the Medicines Discovery Catapult in Cheshire.

There was also money to help the self-employed in Manchester and a new economic area in South Tees. In contrast, a mere £12m was offered to the UK fishing industry for investment in technology and safety.

Duties

Theresa May declared at the Conservative conference that fuel duty would be frozen for a ninth consecutive year and thus it was written in the Chancellor’s speech. Also frozen were the duties on beer, cider and spirits, with the tobacco duty increasing by the customary 2% above inflation.

Air Passenger Duty will increase in line with inflation from April 2020, although there will be no increase for short haul flights.

Universal Credit

This has been much in the news of late with complaints of delayed payments pushing recipients into poverty and to using food banks. Having already committed £3.5bn to the implementation of the scheme, the Chancellor announced a further £1bn over the next five years. He also raised the Universal Credit work allowances by £1,000 per year from April next year.

The Housing Market

Last year, the Chancellor removed stamp duty for first time buyers on purchases up to £300,000 and he now went further, abolishing stamp duty for all first time buyers on shared-ownership homes up to £500,000.

In total, he said that 121,500 first time buyers had benefited from the removal of stamp duty. There would also be a further £500m for the Housing Infrastructure Fund which would see a further 650,000 new homes built.

As expected, the ‘rent a room’ relief now only applies where tenants and owners are living in the same house. From April 2020, Lettings Relief will be limited to properties where the owner is in shared occupancy with the tenant, and the final period exemption will reduce from 18 months to 9 months.

Conclusion

Having delivered his ‘rabbit in the hat’ on the personal allowance and having spoken for more than an hour, the Chancellor ended his speech. “Austerity is coming to an end,” he repeated, “but discipline will remain.” The country, he said, was embracing change and “looking forwards not backwards.”

It was, in many ways, a typical Philip Hammond Budget. As the media likes to point out, he is a Chancellor who delights in the minutiae – sometimes he was rattling off minor points so quickly it was impossible for the television text writers to keep up with the on-screen commentary.

There was some level of feeling in the press commentary that it was a Budget delivered with one eye on the fact that everything could change depending on exactly what shape Brexit takes and, therefore, any major announcements were avoided. There cannot, for example, ever have been a Budget before where the Chancellor did not make a single comment about pensions, savings or personal investments, though there is some minor detail in the full HM Treasury Budget 2018 publication.

Nevertheless, it seems that it is after Brexit when the real work will start. Will it still be Philip Hammond delivering Theresa May’s lines? Only time will tell…

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Spring Statement – March 2018 Overview

Introduction In 2016 Britain voted to leave the EU and new Prime Minister Theresa May invited George Osborne to consider an...

Spring Statement – March 2018 Overview

Introduction

In 2016 Britain voted to leave the EU and new Prime Minister Theresa May invited George Osborne to consider an alternative career and replaced him as Chancellor with Philip Hammond, the MP for Runnymede and Weybridge nicknamed ‘Spreadsheet Phil’ by his Commons colleagues.

Five months later, Hammond stood up to deliver his first Autumn Statement and immediately announced it would be his last. “No other major economy,” he said, “has two financial statements in a year.” Thus the Budget was moved to Autumn and, from 2018, the Spring Budget would become the Spring Statement.

And here we are… Eighteen months on from Mr. Hammond’s first announcement, the UK continues along its road towards Brexit and the Chancellor – who seems secure in his job for now – continues to be a man who will “choose our course and stick to it” (or words to that effect).

The Economic Background

Expectations for the speech were not high among journalists and commentators: ‘Don’t expect Hammond to pull a rabbit – or even a March hare – out of the hat’ was the general consensus.

Nevertheless, the Chancellor would have some good news on public finances to deliver in his speech. Borrowing has reduced significantly and was expected to be around £45bn for this year as opposed to the forecast £50bn, with day-to-day public spending finally in surplus for the first time since 2002/2003. However, the UK’s total national debt currently stands at £1.8 trillion, equal to 86% of the country’s annual economic output.

Would this mean the Chancellor announcing an end to austerity? After all, some local councils are claiming that they are effectively bankrupt and the NHS has seen spending increase by just 1.1% in real terms since 2010. But the Chancellor will not be changing course: speaking on the BBC’s Andrew Marr Show on the Sunday before the Statement, he said: “This (austerity) isn’t about some ideological issue. It’s about making sure we have the capacity to respond to any future shock in the economy.”

This view was backed up by Liz Truss, Chief Secretary to the Treasury, who wrote in The Times, “There will be no red box, no rabbits out of the hat and no tax changes. Our message is simple. Let’s keep on course, keep our economy strong and focus on the opportunities ahead of us. We want to keep taxes low so that the weekly budget goes further.”

With the OECD predicting that the UK economy would grow at the slowest pace of all the G20 countries this year, what could we look forward to in the speech? The rumours suggested there would be more details of taxing the tech giants such as Facebook and Google, consultations on taxing and discouraging the sale of single-use plastics and even the possibility of a tax on chewing gum to pay for cleaning up the mess it makes.

The Speech

As is now traditional, the Chancellor began his speech with a joke at the expense of Labour Shadow Chancellor, John McDonnell. “I won’t be producing a red book, Mr. Speaker,” he said. “But I can’t speak for the Shadow Chancellor,” – a reference to McDonnell brandishing ‘The Thoughts of Chairman Mao’ in the Commons chamber.

Even more traditionally, he spent the next few minutes outlining what had gone right as the Government, “made solid progress building an economy that works for everyone.” But eventually, the chamber ‘rapport’ was put aside and Philip Hammond turned to what he does best: reading out lists of figures…

The Numbers

The Chancellor began with the forecast growth figures for the UK economy, which the Office for Budget Responsibility (OBR) has increased for this year, now forecasting growth of 1.5% in 2018. That will be followed by growth of 1.3% in 2019 and 2020, then 1.4% in 2021 and 1.5% in 2022. These forecasts are up in the short term and down in the long term, presumably reflecting some uncertainty over the impact of Brexit.

Employment and Inflation

The Chancellor pointed out that the number in work had increased by 3 million since 2010, the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40 year low and the OBR is predicting that there will be 500,000 more people in work by 2022.

Equally importantly, it is expected that inflation will start to fall over the next 12 months, “closer to the target rate of 2%” which should see most working people start to enjoy real growth in their wages again.

Public Finances

“Borrowing has fallen by three-quarters since 2010,” said the Chancellor and – as we noted in the introduction – this means that the amount the Government spends on servicing the national debt has reduced significantly. The UK now borrows £1 in every £18 it spends, compared to £1 in every £4 in 2010. The Chancellor also confirmed that debt as a percentage of Gross Domestic Product will also fall, from 85.6% of GDP in 2017/2018 to 78.3% in 2021/22.

He confirmed that borrowing would be £45.2bn for this year, £4.7bn lower than had been forecast in the Autumn Budget. “And,” he announced proudly, “£108bn lower than in 2010.” Borrowing would be 2.2% of GDP this year and would gradually fall to 0.9% in 2022/2023.

Progress since the Autumn Budget of 2017

Despite it only being five months since the Autumn Budget, the Chancellor was keen to summarise a list of achievements. There was nothing new in this section: rather it was a re-statement of the commitments made in the Autumn and a confirmation – at least in the Chancellor’s eyes – that the country is on track.

The Autumn Budget contained a pledge to increase the supply of homes to 300,000 a year by the mid-2020s, via an investment programme of £44bn over 5 years and the Chancellor confirmed that the Government was working with 44 areas throughout the UK to bring this about. In addition, London will receive a further £1.67bn to start building 27,000 affordable homes by 2021/22 and the Housing Growth Partnership, which provides additional finance for small builders, was more than doubled to £220 million.

To loud cheers from the backbenches behind him, Philip Hammond announced that an estimated 60,000 first time buyers had already benefited from the abolition of stamp duty announced in the Autumn Budget.

To some muted jeers, though – quite possibly from some of his own Eurosceptic backbenchers – the Chancellor said that “substantial progress” had been made in the Brexit talks. He looked forward to “another step forward” at the forthcoming EU summit and confirmed that the Treasury would be publishing information about how the initial £1.5bn of the £3bn set aside for Brexit planning would be allocated to Government departments.

Wages and Taxation

In the lead up to the speech, the Chancellor had worked hard to set expectations that there would be little by way of new tax or policy announcements. As it turned out, the Chancellor did mention some previously announced changes, but he was also true to his word when it came to brand new announcements or significant new initiatives.

What The National Living Wage will rise to £7.83 per hour
When From April 2018
Comment All the other minimum rates will rise in line with the increase in the headline rate, with the youth rate seeing the largest increase for 10 years. In total, around 2 million people are expected to benefit from the increases.
What The tax free personal allowance will increase to £11,850
When From April 2018
Comment This will mean that a typical taxpayer will be paying £1,075 less income tax than in 2010/11. The threshold for higher rate tax will also increase to £46,350 from April (or £43,431 in Scotland).

Business

What The next revaluation of business rates will be brought forward
When Moved forward to 2021, instead of next being revisited in 2022
Comment This will be welcomed by businesses, especially those in retail and catering/hospitality which have been hit hard by the high level of business rates. Revaluations will also now take place three yearly rather than five yearly, meaning that there will now be reviews in 2021 and 2024.

Other business measures

In the Autumn Budget, £1.7bn was announced for measures to improve transport in English cities. Half of this was given to cities with mayors, but bids are now being invited from other cities across the UK for the remaining £840m.

Hand in hand with this went the Government’s commitment to improve digital connectivity across the UK. In total, £190m was allocated to this and we will now see the first wave of funding, with £95m allocated to 13 areas across the UK.

There will also be £50m made available to help employers prepare for the new T-levels, the technical qualification the Government is introducing.

The Chancellor also discussed three consultations that may impact businesses, though the detail behind these was missing from the summary published on the government website.

Productivity

A long-standing topic in the Chancellor’s speeches (and his predecessor’s), productivity made it on to the formal agenda again, with the Chancellor promising “to understand how best we can help the UK’s least productive businesses to learn from, and catch up with, the most productive.”

Late payments

The Chancellor also promised, if not action, then at least the promise of action, on what he called “the continuing scourge of late payments”. Small businesses everywhere will doubtless be very keen to see what the Chancellor comes up with on this topic.

“Human capital”

A slightly odd choice of phrase, but the Chancellor surmised that the government and business currently know more about measuring the value of investing in infrastructure than they do about measuring investments in “human capital”. For this reason, he said, he had “asked the ONS to work with us on developing a more sophisticated measure.”

There was then a further consultation announced via the treasury website on the same day as the Chancellor’s speech, though Mr Hammond did not refer to it directly.

Enterprise Investment Scheme

Aimed at the current range of venture capital schemes (including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts), this consultation is ultimately aimed at attracting more investment into innovative firms. The consultation is considering “additional incentives to attract investment” but, as with many other announcements from the Spring Statement, we will have to wait to see whether that promise comes to fruition.

What might we see in the future?

The pundits had speculated that the Chancellor would only speak for 20 minutes or so. 20 minutes came and went and MPs who had planned on a decent lunch started looking nervously at their watches. But in some senses, this last section of the speech was the most interesting, as it gave a clear indication of the measures we might see in future Budgets, depending on the outcome of various consultations.

The plastic tax

This has been widely trailed – it is also referred to as the ‘litter levy’ – and the Government will use the tax system to ‘encourage the responsible use of plastic throughout the supply chain.’ This will include items such as coffee cups, plastic cutlery and foam takeaway trays. The Chancellor did not mention chewing gum specifically but the rumours are that it will also be included in the measures. “Some of the money raised from any tax changes,” for which you can read, ‘there will be tax changes’ – will be used to encourage the creation of newer, greener products, while £20m will also be given to businesses and universities to fund research into ways of reducing the impact of plastic on the environment.

Taxing the tech giants

What would a Budget speech – or a Spring Statement – be without an attack on the tech giants who are “not paying their fair share of tax?” The Government will once again be considering ways in which to tighten up on Facebook, Amazon, Google and friends: looking 10 years down the line it may also need to consider the impact of the Chinese tech giants such as Alibaba, Tencent and JD.com.

White van man goes green?

At the moment there is tax relief given for agricultural diesel but the Chancellor said he would “call for evidence” on whether this is contributing to air pollution. And in the days when every delivery from Amazon arrives in a white van, he announced that he would consult on tax cuts for low-emissions vans.

Giving people the skills they need

Clearly, improving skills benefits not just the individuals concerned but the wider UK economy, and the Chancellor gave a clear hint that he will offer tax relief to both employees and the self-employed who fund their own training.

Goodbye to cash?

Far more of us now use digital payments rather than cash – although the UK has some way to go to catch up with some countries (such as Sweden) where cash has all but disappeared. The Chancellor is ‘seeking views’ on encouraging business who want to use digital payments. And why wouldn’t he? Digital payments can be tracked and taxed and would represent a way to strike back at the black economy.

Conclusion

The Chancellor’s final point may have read as something of a warning to those up and down the country who currently deal heavily in cash (think hairdressers and window cleaners), but he was determined to finish on a high for all, repeating a message that his party has long promoted. He was keeping the UK on course to be, “an outward-looking, free-trading nation, confident that its best days lie ahead.”

The detail of exactly how he plans to make that happen, though, may well have to wait until the Autumn Budget, where many of the Chancellor’s plans will be made clearer.
For now, however, the new, slimmed down Spring Statement acted as a useful summary of our current economic outlook and an interesting trailer of both things to come and plans being made.

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Autumn Budget – November 2017 Overview

Introduction Since the Spring Budget, the UK has held a General Election, the negotiations to leave the European Union have...

Autumn Budget – November 2017 Overview

Introduction

Since the Spring Budget, the UK has held a General Election, the negotiations to leave the European Union have continued – not always at breakneck pace – and there has been the usual collection of mixed news for the UK economy.

The General Election started as an expected coronation for Theresa May and ended as an embarrassment, with the Conservative party now dependent on Northern Ireland’s DUP for a working majority in the Commons. The Prime Minister remains committed to delivering Brexit on March 29th 2019 and currently appears ready to offer the EU more money in the ‘divorce settlement’ to kick-start the talks on trade. But with negotiations on the coalition government in Germany having failed over the weekend, it is difficult to see how any talks can make much progress with the EU’s largest net contributor facing what the BBC’s Andrew Neil called the “biggest political crisis since the 1940s.”

In March, Philip Hammond’s nickname was ‘Spreadsheet Phil’ (with continued murmurings of discontent on the backbenches that has given way to much ruder epithets) and as he stood up to speak, the Chancellor would need to restore confidence in both the Government and his own personal credibility – otherwise his first Autumn Budget may well be his last.

The Chancellor’s speech started with the usual collection of numbers and statistics. In truth, the news on the UK economy is mixed. The Swiss Bank UBS has just raised its forecast for UK growth in 2018 from 0.7% to 1.1% and all three sectors of the UK economy – manufacturing, services and construction – reported encouraging figures in October. But for most people, the fact is that wages continue to lag behind inflation, which the Bank of England believes will stay high for some time to come. With Christmas coming, the British electorate doesn’t want fiscal facts and figures from the Chancellor, it wants a feelgood factor.

What were the rumours?

In ‘the old days’ it was very simple. The Budget was delivered in March. The Chancellor stood alone outside 11 Downing Street and held aloft his battered red despatch case which contained the speech – the contents of which were known only to the Chancellor and his Cabinet colleagues.

Now the Budget is delivered in November and the Chancellor will stand outside 11 Downing Street flanked by his entire ministerial team. The rumoured contents of his speech? This year – in what must be the most-leaked Budget speech ever – they seem to be known to anyone who can click ‘news’ on the BBC website.

Although these early rumours were swiftly replaced by the realities of the speech, it is worth detailing them here. Philip Hammond does not have a reputation as an imaginative man and anything that didn’t turn into reality today may crop up again in the future.

More money for research and development was widely expected and for transport links in and around major cities as he continues to wrestle with the UK’s poor productivity. Also revealed prior to the speech was news on the roll out of 5G connectivity across the UK and investment in the infrastructure for driverless cars, which are now expected to appear on our roads by 2021.

The number of small businesses and self-employed people has risen rapidly over the last five years. By and large, they are natural Conservative voters and you would think a Conservative Chancellor would do everything he could to help them. Instead, SMEs and the self-employed may have been waiting for the Budget with some dread, following the Chancellor’s ill-thought out raid on Class 4 National Insurance contributions in March and what freelancers in the public sector considered punitive changes to the IR35 regulations.

Prior to the speech there were rumours of plans to lower the VAT threshold. The most extreme suggestion would see a lowering of the threshold to £25,000 which could even catch hobbyists selling through eBay.

The ‘takeaway tax’ had also clearly been discussed in the run up to the speech. Following the success of charging for plastic bags, the Chancellor was clearly considering a tax on single-use plastic items such as packaging, bubble-wrap and the polystyrene boxes used for takeaways.

Finally, it was widely expected that we’d see a shake-up in business rates – or at least the promise of one.

The Speech

After what seemed a rather lengthy Prime Minister’s Questions, the Chancellor finally rose to speak at 12:39pm. He hitched up his trousers and launched into the good news about a British economy “which continues to confound those who seek to talk it down.” He was – as he had to be – bullish about the future and determined that the UK should “seize the opportunities” offered by Brexit. Expressing a desire to make the negotiations with the EU a top priority, the Chancellor nevertheless tossed the pro-Brexit wing of his party a £3bn bone with a commitment to prepare for every possible eventuality.

Confirming some of the leaks regarding support for the technology sector, he said that Britain was at “the forefront of a technological revolution” (cue raised eyebrows in Silicon Valley and the Far East) and that business and government must invest to secure that future.

Despite this, the Budget would also take a balanced approach, protecting and promoting the interests of families as the Chancellor declared that he wanted the UK to “be a force for good in the world” as we build “a country fit for the future.” With the ‘mention key strapline’ box well and truly ticked, he took a sip of water, politely declined the Prime Minister’s offer of a cough sweet and launched into the numbers – or as he described it, “the part containing the long economicky words…”

The Numbers

Despite the fact that the Chancellor was optimistic about the forecasts from the Office for Budget Responsibility (OBR), the simple fact is that the forecasts are down from those in the March budget – although it should be pointed out that the OBR is currently being more pessimistic than the Bank of England.

Growth in the UK economy was forecast to be 1.5% in 2017 (down from an earlier forecast of 2%) and 1.4% in 2018: it would then fall to 1.3% for the next two years before rising to 1.5% in 2021 and 1.6% in 2022. The OBR also saw inflation peaking at 3% “in this quarter” before falling again to nearer the 2% target figure. Forecasts for productivity and business investment were also revised downwards but the OBR did expect another 600,000 people to be in work by 2022.

The State of the Public Finances

The Chancellor said that annual borrowing would be £49bn this year – £8.4bn lower than forecast in March. Borrowing should now fall in every subsequent year until it reaches £25.6bn in 2022/23. Public sector net borrowing is forecast to fall from 3.8% of GDP last year to 2.4% this year – and eventually to 1.1% in 2022/23. Debt will peak at 86.5% of GDP this year and then start to fall, reaching 79.1% of GDP in 2022/23. All of this, said the Chancellor, “was testament to the hard work of the British people” and meant that he could “choose to use the headroom” to invest in the economy, thereby helping families and businesses.

The Chancellor said that he wanted to put a “dynamic and innovative economy at the heart of Britain” and that this would require both public and private investment. As a first step, he announced that the National Productivity Investment Fund (NPIF) would be extended for another year and increased to £31bn, with a specific £2.3bn for investment in research and development in 2021/22. He then turned to other specific measures.

Personal Taxation and Allowances

This was a Budget short on specific measures that impact either an individual’s ‘debit’ or ‘credit’ columns, as the Chancellor chose to address ‘larger’ topics such as infrastructure and Brexit. However, there was still a single nugget to take note of when it came to the personal allowance and higher rate tax threshold.

What The Personal Allowance will rise to £11,850 from April 2018 and the threshold for paying higher rate tax will rise to £46,350. The current figures are £11,500 and £45,000 respectively.
When From April 2018
Comment These were announcements that were expected and are staging posts on the way to the pledge to increase the thresholds to £12,500 and £50,000 by 2020.

Pensions and savings

What The main ISA limit will remain unchanged at £20,000, whilst the Junior ISAs and Child Trust funds limit will rise in line with inflation to £4,260.
When April 2018
Comment A fairly minor change, not mentioned by the Chancellor in his speech, the Junior ISAs and Child Trust fund limit got an increase, whilst the main limit remained unchanged. After a few years of sizeable ISA rises, this could well be the norm for the next few Budgets.
What The lifetime allowance for pensions will get a rise in line with the Consumer Price Index (CPI), going up to £1,030,000.
When April 2018
Comment Although this is a small rise in line with inflation, which will only impact those with large pension savings, the real term difference could be significant. If the whole £30,000 increase is taken as a lump sum after April 2018, for example, that’s a tax saving of 55% and a real-term increase of £16,500 extra in income for the retiree.
What Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme.
When From 6th April 2018
Comment This is an increase from 6 months currently.

Business Investment & Business Taxation

What The announcement of over £500m of extra investment for technology investment, including 5G, broadband and Artificial Intelligence.
When Ongoing over the next several tax years
Comment This was a widely trailed move and continues the government’s commitment to spending on digital infrastructure and technology projects.
What A commitment to a total £540m investment in initiatives that will support the growth in electric vehicles.
When From next April
Comment Another widely expected move and one which was coupled with the announcement that from next April, diesel cars which do not meet air quality standards will be hit with an additional tax. Meanwhile, those who charge electric vehicles at work will not be taxed on a benefit in kind.
What The VAT threshold remained unchanged.
When N/A
Comment Despite the fears of the small business community and the Chancellor’s dark mutterings about the registration threshold in Germany only being £15,000, the VAT threshold will remain unchanged at £85,000 for the next two years. “A banana skin dodged,” as the BBC’s economics correspondent put it.
What Business rates will now be based on CPI, rather than the Retail Price Index (RPI).
When April 2018
Comment There was good news on business rates, with the Chancellor bringing forward the move to have business rates based on CPI as opposed to RPI. He brought the change forward by two years which he estimates will save businesses £2.3bn. Revaluation periods were also changed from every five years to every three years. The £1,000 discount for small pubs was also extended to March 2019.
What The abolition of the so called ‘staircase tax’.
When The government will publish draft legislation shortly
Comment Under ‘staircase tax’ rules, companies operating over several floors within the same property were handed separate business rates assessments for each occupied floor, as opposed to one bill for the entire premises. The backdated tax was initially introduced after a landmark Supreme Court ruling in August 2017. Thousands of small business owners will be celebrating following the announcement that this tax system will be abolished.

The Chancellor also announced that further action would be taken to combat tax avoidance and evasion, continuing a Budget trend over the last few years. Mr Hammond clearly continues to have the multinational digital companies in his sights as he announced that from April 2019, UK income tax will be applied to digital economy sales made here, but where the proceeds are paid to a ‘low tax jurisdiction’. This, he estimated, would raise “£200m a year of additional revenue.”

Other measures

The Housing Market

This appeared to be the real meat of the Chancellor’s speech: you suspect that more than one backbench ‘colleague’ had starkly pointed out to him that ‘young people won’t vote Conservative if you don’t give them anything to conserve.’ He started, though, by allocating a further £28m in support of the victims of the Grenfell fire disaster, and a similar amount as part of a commitment to half the number of people sleeping rough by 2022.

His main thrust, however, was in helping young people – both to buy property and to find affordable rented property. The Chancellor pointed out that the number of people aged 25-34 owning their own home has dropped from 59% to just 38% over the last thirteen years.

The Chancellor announced several measures, including increasing the supply of land for building and help for SME housebuilders, plus plans to train workers in the construction sector. In total, the package was worth £44bn over the next five years.

There was also the announcement of a raise to the empty homes premium, designed to encourage owners of empty homes to bring them back into use. Previously 50%, local authorities are now able to increase this to 100%.

When the dust had settled though, the commitment was to build 300,000 net additional homes a year by the mid-2020s: perhaps not the news that many had been hoping for, as the Chancellor confirmed his commitment to maintaining the green belt. There would, however, be investment in the Cambridge/Milton Keynes/Oxford corridor, ultimately leading to the building of 100,000 new homes in Oxfordshire by 2031. But he kept the biggest housing rabbit in his hat until the end of the speech…

What An abolition of stamp duty for first time buyers on properties with a value up to £300,000 – and on the first £300,000 of a property with a value up to a £500,000.
When Immediately
Comment It is not often that middle-aged Conservative MPs shout “whoop!” but this was the positive news they had been waiting for. The Chancellor said that he had dismissed ideas for a stamp duty holiday and decided on a move that “will see 80% of first time buyers pay no stamp duty and save those buying a house between £300,000 and £500,000 an immediate £5,000.”

Education and Skills

The Chancellor confirmed the commitment to three million apprentice starts by the year 2020, thanks to the apprentice levy, and announced £20m of funding for Further Education colleges who were introducing the new T (technical) level exams. There would also be extra funding to boost the teaching of maths at higher levels and a commitment to upskill a further 8,000 computer science teachers (at a cost of £84m) to a total of 12,000 teachers, as well as the establishment of a National Centre for Computing.

Finally, the chancellor announced a collaboration between the Government, the CBI and the TUC to support training in the construction sector and more broadly, digital skills.

Universal Credit and the Living Wage

Following widespread criticism of the implementation of the new system of Universal Credit, the Chancellor announced a series of measures – costing £1.5bn in total – designed to make it fairer and more in line with what he described as a “modern welfare system.” He then moved on to the National Living Wage and personal taxation.

What The National Living Wage (NLW) will rise by 4.4% to £7.83 from the current £7.50.
When From April 2018
Comment There will also be a commensurate increase in youth rates, part of the Chancellor’s commitment to a ‘fairer Britain’ and equivalent to about a £600 annual pay rise for someone receiving the NLW.

Help for the Regions

As expected, the Chancellor announced a £1.7bn city region transport fund, to be shared between six regions with elected mayors and the rest of the UK: this appears to be primarily aimed at improving transport links within our cities. There was a further devolution of powers to Greater Manchester plus up to £35m to improve rail passenger communications, including a trial to improve communications on the Trans-Pennine rail route. Over the period through to 2020/21, there were increases in budgets earmarked for the Scottish government of £2bn, £1.2bn for Wales and £660m for the Northern Ireland executive.

Alcohol, Tobacco and Travel

“Happy Christmas, Mr Deputy Speaker,” beamed the Chancellor, announcing that there would be no increase on the duty on beers, wines and spirits as he sought to support “the great British pub.” The only exception to this would be an increase on the duty on white cider.

Owners of private jets may well be used to drinking something rather more refined than white cider, but they were hit in the Budget as the Chancellor announced that fuel duty on short haul flights would be frozen, as it would be for economy seats on long haul flights. However, this would be paid for by an increase on the duty applicable to premium seats and to private jets.

All but a few private jet owners may also be too old to qualify for the new young person’s railcard. Again, the move was widely trailed, with the chancellor confirming the introduction of a railcard for those aged 26-30.

The price of cigarettes is set to rise with duty on tobacco going up by 2%, plus inflation. There will also be an additional 1% duty on hand-rolling tobacco.

The NHS

As expected, the Chancellor announced extra money for the NHS, a £10bn increase in annual funding by 2020. There would also be an extra £2.8bn of resource funding over the next three years, with an immediate cash injection of £335m this year: £1.6bn between 2018/19 and a further £900m between 2019/20.

Conclusion

The Chancellor finished on a high and, like all good actors, he got off the stage with the cheers ringing in his ears. Britain was at “a turning point,” he declared, “but we will be looking forwards, not backwards.” Having spoken for just over an hour, he remembered his strapline one last time – “It is a Budget fit for the future and I commend it to the House” – and sat down to a better reception than he had probably expected at 12:30.

In truth, there was little within this Autumn Budget for each of us individually to either celebrate or bemoan. Most of the headline writers picked out the boost for Brexit or the cut in growth forecasts, perhaps dependent on political persuasion. There was coverage too for the housing pledges and on the internal political angle to the speech when it comes to the machinations of the Conservative party.

Having proposed cash to support Brexiteers and to those who felt a boost was needed to attract younger Conservative voters, the consensus seemed to be that Mr Hammond had presented a Budget most of his party would be content with. That may well be enough to mean that we see him at the despatch box at least one more time, though whether he is considered “fit for the future” beyond that, only time will tell.

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How to combine work/life balance, job satisfaction and retirement

Two of the biggest concerns faced by workers when they reach their 50s and 60s are those of achieving job satisfaction and a...

How to combine work/life balance, job satisfaction and retirement

Two of the biggest concerns faced by workers when they reach their 50s and 60s are those of achieving job satisfaction and a work/life balance. Recent studies have offered fresh insight into the reasons behind these issues and the best ways to tackle them.

One study conducted by economists at the University of Southern California and California State University explored how work/life balance issues affected those aged between 51 and 79. 14% of women in this age bracket who retired earlier than they intended to did so because they had to care for a spouse or other family member who experienced a health scare. However, this was far less often the case in men, perhaps due to them being more likely to ‘outsource’ the care their spouse needed. In contrast, women nearing retirement age make more adjustments than men when it comes to the health of a partner, taking on more of the caregiving role themselves.

The report also found that a poor work/life balance was also more likely to make women retire than men. Men are also more likely than women to continue working part-time beyond retirement age if their spouse is still working. Women stated they were more likely to continue working full-time in this age bracket if their employer offered health insurance, to the point that researchers described it as a ‘critical pull factor’ in women.

A second study looked at issues around job satisfaction and its relationship to working conditions. The research, carried out in collaboration between Harvard University’s Medical School, the University of California and the nonpartisan RAND Corporation, found that workers nearing retirement age valued other elements of job satisfaction aside from pay and benefits.

Most prominently, those over 50 look for work flexibility, meaningful work, the chance to develop transferable skills, and a work environment which feels supportive. The researchers found that these intangibles were more important than money in older workers’ decisions on whether to continue working: having a flexible working schedule had the same impact as a 9% pay increase, whilst a switch from a physically demanding job to one which involved only moderate physical work was equivalent to a 20% pay increase.

If you’re still employed and nearing your 50s or 60s, or you’re already there, think about what’s most important to you when making decisions about whether you want to retire or carry on working full-time. It’s likely that money will be further down your priority list at this stage of life, so let flexibility, job satisfaction and the chance to spend time with your loved ones take precedence.

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Too late to start saving?

Not beginning to save towards your retirement until you reach your fifties would not so long ago have been considered leaving...

Too late to start saving?

Not beginning to save towards your retirement until you reach your fifties would not so long ago have been considered leaving matters far too late to put anything meaningful away for your life after work. Previous generations saw building a pension as something to do over an entire career, with contributions throughout your working life coupled with investment growth being the only way to ensure your retirement pot was substantial enough to provide for you throughout your retirement.

However, whilst compound interest still means that anything put away at the start of your career will see some serious growth by the time you need it much later in your life, the reality today for many young people is that they simply have very little to invest when they first begin work. Many may find that they won’t be able to begin saving seriously until they reach middle age.

The reasons for this are several. First of all, your wages are statistically likely to reach their peak for women during their forties and for men in their fifties. Secondly, as the average mortgage term is twenty-five years, most people who bought their home in their twenties are likely to have finished paying it off by the time they reach their fifties. A third key reason is the declining cost of raising children. Whilst it’s unlikely that you’ll stop giving them financial support completely, if you’ve had kids in your twenties or thirties it’s probable that the cost of providing for them will have gone down a great deal by the time you’re heading towards 50.

With considerable tax relief on both ISA investments and pensions, it’s now possible to build a healthy retirement fund even if you only start saving in your fifties. For example, someone with no existing savings, earning £70,000 annually, who started saving the maximum permitted yearly amount of £40,000 at age 50 could amass a pension pot of £985,800 by the time they turn 67, assuming a 4% annual return after charges.

£40,000 a year might sound like a huge amount to save every year, but this amount includes the generous tax relief enjoyed by pension savings. Our £70,000 earner would only need to put away £27,000 of their own money in order to reach the £40,000 contribution, whilst a basic rate taxpayer would need to contribute £32,000 to achieve the same.

So, whilst it’s sensible to begin saving as early as you can, it is possible to begin putting money away when you reach middle age and ensure you have enough to provide for yourself later in life. The last ten years of your working life can reasonably be seen as some of the most important in terms of preparing for your retirement.

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Why retirement is worrying millennials and what steps they are taking

A recent study by HSBC has revealed the main financial worries of the ‘millennial’ generation, recognised as those born...

Why retirement is worrying millennials and what steps they are taking

A recent study by HSBC has revealed the main financial worries of the ‘millennial’ generation, recognised as those born between 1980 and 1997. As its title suggests, the ‘Future of Retirement’ survey focuses primarily on how millennials feel about how they are preparing for life after work, but also delves into the wider issues around money and modern life which are inherently linked to the subject.

In general, millennials see themselves as less fortunate than the generations which have come before them. Over half (52%) felt that they had seen weaker economic growth than previous generations, whilst 60% said they saw themselves as experiencing the consequences of decisions made by those older than them, including rising national debt and the global financial crisis. In relation to retirement, 65% of respondents are worried that they will run out of money when they retire, whilst 46% were concerned that employer pension schemes would collapse without any payout for their generation.

The average age that millennials begin saving for their retirement is 27, with just 13% admitting to not having begun putting money away for their pension yet. 76% said that curbing their current spending was difficult but necessary to save for later in life, whilst 68% are willing to do so. When it comes to investment, nearly half of those surveyed (48%) said they would go for a risky opportunity which had the potential for greater returns further down the line.

Expanding out to look at the concerns of all those currently working, which includes both Baby Boomers (those born between 1945 and 1965) and Generation X (born between 1966 and 1979), the survey found that only 17% were worried they wouldn’t be financially comfortable in retirement based on their current savings, with a worrying 14% admitting to having not been able to save anything. However, over half (52%) said they felt that due to the constantly changing financial climate, their current retirement plans would not be relevant.

When asked about back-up plans, around two thirds (67%) of working people said they would continue working in some way after they reached their retirement, whilst more than four fifths of people (82%) said they were intending to retire two years later than originally planned in order to give themselves greater financial stability. 41% also said they wouldn’t mind taking on a second job or working for longer to supplement their pension pot.

The key guidance from HSBC’s research is that starting to save early is the best way to ensure you have sufficient savings to support yourself after you’ve retired. Another key message is the importance of seeking advice, with many people now using technology to plan their retirement: almost half of those surveyed (49%) have used the Internet to research their options, 35% have used online retirement calculators and 27% have contacted advisers online. Online savings accounts are also popular, with 41% saying that they are using one to put money away.

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Falling house prices in the UK for the third month in a row

Recent figures have shown that house prices in the UK fell again in May this year, making it the third month in a row which has...

Falling house prices in the UK for the third month in a row

Recent figures have shown that house prices in the UK fell again in May this year, making it the third month in a row which has seen prices go down. Nationwide, the UK’s biggest building society which carried out the research, stated that this is the first time house prices have fallen in three consecutive months since 2009. Following the drop of 0.3% seen in March and 0.4% in April, May saw prices decrease by 0.2%, making the average house price £208,711. The annual rate of price growth also hit 2.1%, down from 2.6% in April and the slowest pace seen since June 2013.

“It is still early days, but this provides further evidence that the housing market is losing momentum”, said Nationwide’s chief economist Robert Gardner. “Moreover, this may be indicative of a wider slowdown in the household sector, though data continues to send mixed signals in this regard.” The building society also warned that it is too soon to know whether the recent downturn can be considered to be more than a “blip”.

Considering whether the slowdown could be a result of the snap general election being called, Gardner was confident that the two were not linked: “Housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers elections are not foremost in their minds while buying or selling their home.”

Nationwide have also suggested that house prices will continue to slow, and that inflation rises will put pressure on household budgets, leading to weakened household spending. However, the building society has predicted that house prices will increase by around 2% overall throughout 2017, buoyed by a shortage in the supply of housing across the UK. Whilst this offers some reassurance, this figure is considerably lower than the 4.5% rise seen in 2016.

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How good financial planning enables a career change

James Kemp knows how to pace himself. He should do. He’s a keen runner and has been an organiser and participant in Park Runs...

How good financial planning enables a career change

James Kemp knows how to pace himself. He should do. He’s a keen runner and has been an organiser and participant in Park Runs since their early days. However, when it came to saving for his pension he didn’t know whether the pace he’d set would take him through the retirement line comfortably or leave him and his family short of the lifestyle goals he’d targeted.

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Selling Your Business – It’s Not About Timing

Ernie the entrepreneur wants to retire. Ivor the investor offers him £5 million to buy his business. That’s a whole lot of...

Selling Your Business – It’s Not About Timing

Ernie the entrepreneur wants to retire. Ivor the investor offers him £5 million to buy his business. That’s a whole lot of money to Ernie but he decides to wait just in case he can get a better price from someone else. Next year, Ernie is offered £4 million by Connie the competitor. It’s still a lot of money to Ernie but he wishes he’d taken Ivor’s offer.

If you are trying to time the sale of your business so you get the highest possible price, you are likely to be left in one of two camps: either wondering if you could have got more if you’d waited longer or wishing you’d taken an earlier offer. A simple shift in mind-set could banish these musings.

If you went into the sale of your business knowing exactly how much you needed in order to live the personal lifestyle you desired, the decision would not only be much easier, it would follow the kind of logic on which sound business decisions are made.

When Chris Daniels received an unexpected offer to sell his £25 million turnover import and distribution business, his solicitor sent him to Freedom Financial Planning’s Andy Nevett.

“Over the years I’d had three or four different independent financial advisers but my experience and my feeling towards the whole industry was not very positive.” Said Chris. “I was looking for someone I could trust who would do more than a one off meeting, who would actively manage what would hopefully be some more significant investments.”

Andy and the team at Freedom Financial Planning take a different approach when it comes to managing wealth. Long before there any discussions about their unique approach to actively managing investments, Andy gets to know what is important to his clients, what their dreams are and how they like to live their lives. Knowing this he works out how much money his clients will need to keep this lifestyle for the rest of their lives. He calls this ‘knowing your number’.

Andy explained how he armed Chris with enough information to decide whether the offer he had received was worth taking:

“We worked out the cost of his lifestyle, not just for this year, but next year and the foreseeable future, so that Chris knew his number. Once he knew how much he needed for his lifestyle, for him and his family, he could confidently go away and negotiate the sale of his business.”

After almost 25 years spent building the business, Chris was keen to devote more time to his family, buy a yacht and travel the world. The sale of his business would allow him to do this. However, the decision to sell had to make financial sense too.

“Most business owners do it because they enjoy their business but it comes a point where you want to get away from the desk, want to not have to answer that email at 7 o’clock in the morning or take that call at 9 o’clock at night. But you’ve got to have the confidence that you’ve got the funds to do that and Freedom Financial Planning just gave us that confidence to make that decision.”

If you are looking to sell your business sometime in the next five years, ask Freedom Financial Planning to work out your number, as you never know when you will get an offer. Call Andy and the team on 01663 747000.

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Retiring in England? Here are the top destinations

Whilst the impact of Brexit is yet to be known, one thing that may become trickier is relocating to the continent after Britain...

Retiring in England? Here are the top destinations

Whilst the impact of Brexit is yet to be known, one thing that may become trickier is relocating to the continent after Britain leaves the EU. It’s a change that will affect those at the end of their working life as well as those near the start, as in the past many have chosen to live outside the UK for their retirement years. Thankfully, whether your plans to move to Europe have to be shelved, or you were always intending to spend your retirement in the UK, there are plenty of popular retirement destinations throughout England to consider.

North Yorkshire’s rural district of Craven is a popular retirement choice. Taking in the market town of Skipton, together with the larger towns of High Bentham and Settle, as well as a sizeable area of the Yorkshire Dales, Craven offers the best of both town and country living. The high street in Skipton is a past winner of the ‘greatest street in England’ from the Academy of Urbanism, which considers such factors as environmental and social sustainability, local character and distinctiveness and user friendliness. The average house price is around £205,000, with a detached house costing about £310,000.

West Devon is another area to consider. The variety of landscapes is by far the most attractive feature of this part of England, with chocolate box villages, agricultural landscapes and Dartmoor National Park providing a picturesque backdrop to your retirement. Average house prices come in at just over £250,000, although you can find semi-detached properties for under £200,000. One drawback is that travel can be an issue, with no mainline stations in the area and at least a three hour train ride into London from the nearest stations Exeter and Plymouth, so bear this in mind if you have reason to venture out of the county regularly.

If you’re looking for somewhere with a name as evocative as the place itself for your retirement, then Eden in Cumbria could be the right choice. A rural haven, Eden offers you part of the Lake District National Park, the lakes and mountains of Ullswater, the beautiful countryside of the Eden Valley and the breathtaking landscape of the North Pennines. Eden also has only 63 people per square mile, making it the place with the lowest population density out of England’s 324 local government districts. The average house price is a remarkably low £190,000, and you could easily pick up a flat for under £125,000.

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