Steven Mugglestone

The more I learn, the less I know

Autumn 2011 Statement Headline Bits

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Autumn 2011 Statement Headline Bits
The Chancellor delivered his Autumn Statement to Parliament, on 29 November 2011, together with the Office for Budget Responsibility’s updated growth and borrowing forecasts.  Reductions in spending were announced to ensure that the country meets its fiscal targets, with some of the savings being used in the short term to fund investment in infrastructure resulting in the generation of long term growth. The Chancellor also announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is fairly implemented.

The statement comprises numerous announcements, with key headlines of R&D tax credits being extended to large businesses and extension to tax relief for seed investment in start-up businesses.  Other initiatives and announcements include the following:

  • The State Pension Age is to rise to age 67 between April 2026 and April 2028. This is due to the increase in average life expectancy since the original State Pension Age timetable was produced. Future increases in the State Pension Age will be based on demographic evidence.  The Government will consult on the proposed process and take into consideration the views of all interested parties when these decisions are made.
  • The standard minimum income guarantee in Pension Credit increases by 3.9 per cent in April 2012 (to £142.70) per week for single pensioners and £217.90 a week for pensioner couples.
  • The full basic State Pension will rise from April 2012 by £5.30 to £107.45 per week. The full- rate for couples for those whose entitlement is based on their spouse/civil partner’s pension will rise by £8.50 to £171.85 per week.
  • The threshold for Savings Credit will rise to £111.10 for single pensioners and £177.20 for pensioner couples.
  • The Government has also published its National Infrastructure Plan 2011. The Autumn Statement announces a new strategy to bring to £20 billion of private sector investment. To do this a Memorandum of Understanding has been signed with two groups of UK pension funds to support additional investment in UK infrastructure.
  • The Government is also working with the Association of British Insurers to prevent employers gaining excessive tax relief for asset-backed pension contributions to their pension schemes.  The Government will introduce legislation in the Finance Bill 2012 (that takes effect on 29 November 2011) to ensure no excessive relief can arise for new arrangements.  Transitional rules will apply to existing asset-backed arrangements that have already received tax relief to ensure the correct amount is given by the end of an arrangement.  Asset backed contributions are those being made by large employers to fund their defined benefit (DB) schemes and manage pensions deficits by means of a series of payments guaranteed with security over the assets from which the payments derive, rather than making a one-off lump sum contribution.
  • Introduction of the Seed Enterprise Investment Scheme (SEIS) from April 2012. This will enable individuals to invest in qualifying new start-up companies and receive income tax relief at 50% with an annual investment limit of £100,000. In addition gains realised on disposal of an asset in 2012/13, which are then invested in SEIS in the same tax year, will be exempt from capital gains tax.
  •  The annual exempt amount for capital gains tax is frozen at £10,600 for 2012/13.
  • The Chancellor announced an indefinite delay on “auto-enrolment” for pensions for any firm with fewer than 50 employees.  Pension campaigners will to say that it undermines the Government’s attempts to encourage people to save more for their retirement.
  • Larger businesses are still be obliged to automatically enrol their employees into pension schemes from next year which is an additional cost as companies have to match the contribution made by their employees.

Other areas included in the autumn statement includes:

Growth

  • 2011 forecast revised down to 0.9% from 1.7%
  • 2012 forecast revised down to 0.7% from 2.5%
  • In 2013, 2014 and 2015, forecast growth will be 2.1%, 2.7% and 3%

Borrowing

  • Extra £11bn borrowing over the next 5 years
  • Borrowing forecast to be £127bn in 2011-2, falling to £120bn, £100bn, £79bn and £53bn in following years
  • Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards

Transport Costs

  • The average rise in regulated rail fares to be capped at 6% – 1% above inflation – in January, rather than the 8% cap expected
  • Planned 3p fuel duty rise in January to be scrapped.
  • But duty will go up by 3p in August.

Business

  • OBR forecast of total public sector job losses up from 400,000 to 710,000
  • Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
  • £1bn business finance partnership to raise money for medium-sized firms
  • Regional Growth regeneration fund to get £1bn in extra funding£250m support package for energy-intensive firms, £500m for science
  • Business rate holiday relief for small firms extended to April 2013New time limits for planning applications£1bn “youth contract” to subsidise six-month work placements for 410,000 young people
  • Bank levy to increase in January

Infrastructure

  • £5bn new spending over three years, including £1bn for the rail network
  • Go-ahead for 35 road and rail projects across England
  • Aim to unlock a further £20bn in investment from pension funds.

 

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

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Written by Steven Mugglestone

November 30, 2011 at 5:34 pm

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