The Autumn Statement 2014

UK Treasury BudgetThe coalition government’s 2014 Autumn Statement was formulated, unsurprisingly, with more than half an eye on the General Election next May.

The high-end property market, wayward banks and tax-shy companies all found themselves in the line of fire and these measures helped to divert attention away from the fact the government had not hit its target to reduce the deficit.

Reforms to stamp duty on residential property garnered the bulk of the headlines. Chancellor of the Exchequer George Osborne introduced a new tiered system, in which rising rates of stamp duty will be charged in incremental steps. As a result, stamp duty will fall for 98% of house buyers and only those buying properties priced over £937,000 will pay more under the new system.

The annual allowance for individual savings account (ISA) contributions was increased from £15,000 to £15,240 from April 2015 and, in a welcome move for savers, new rules will allow spouses to inherit their partner’s ISA free of tax following their partner’s death.

In a more controversial move, the Chancellor clamped down on multinational companies that generate corporate profits in the UK, which are then diverted overseas. These profits will be taxed at 25% and the change is expected to raise £1bn over the next five years.

The UK is the fastest-growing of all the ‘G7’ group of wealthiest economies and growth in 2014 has proved stronger than expected. The Office for Budget Responsibility (OBR) increased its forecast for the UK’s economic expansion during 2014 from 2.7% to 3%. Looking ahead, growth is expected to slow to 2.4% in 2015 and 2.2% in 2016, followed by growth of 2.4% in 2017 and 2.3% in both 2018 and 2019.

Although the UK’s deficit has halved since 2010, the Chancellor was forced to admit borrowing will be higher than previously predicted. A drop in tax receipts has meant the OBR had to raise its forecast for the deficit this year. The deficit is expected to post a smaller-than-expected drop in 2014/15, falling from £97.5bn in 2013/14 to £91.3bn in 2014/15. Looking further ahead, the deficit is forecast to fall to £14.5bn by 2017/18, after which it is forecast to move into surplus.

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