Image of a man at a window

George Osborne threatened an ‘emergency budget’ after Brexit. This didn’t happen, but the Autumn Statement did not make cheerful reading.

The continued strength of the UK economy has confounded many forecasters' expectations. The Office of Budget Responsibility however does not expect this to continue. We are only in the foothills of negotiating even the timing of our negotiations to exit the European Union. Predictions of growth are difficult at the best of times, but uncertainties have multiplied since the referendum. This will affect the confidence of the Chancellor, and businesses and ultimately households too, and the urgency with which we face the challenges of our exit.

Political arguments will continue to rage about whether the OBR’s forecasts of a near £60bn ‘cost of Brexit’ are too optimistic or pessimistic. Our national debt will soon approach £2tn and over 90% of GDP – a level that our former Chancellor said would lead to a ‘permanent loss in potential output’. Philip Hammond has to reassure markets, investors and voters that there is a path to long-term prosperity, even if in the short term there are obstacles. Philip Hammond has given himself more room for manoeuvre, pushing out the target for what he called a ”fiscal balance” well into the next Parliament.

The threat of a hit to growth from Brexit has led to calls for big infrastructure spend. Our new chancellor – a.k.a. ‘Spreadsheet Phil’ – has been more sceptical than his predecessor about the long-term benefits of super-scale projects and has demanded more time to consider spending commitments. Shorter-term fillips have however been proposed on a more local level to boost growth more rapidly and more spending on roads and affordable homes has been announced.

Productivity – or the lack of it – has been keeping our wages and growth rates down, despite our low levels of unemployment. This needs investment in ‘soft’ infrastructure such as education and skills and technology as well as traditional physical infrastructure, such as roads and railways. Mr Hammond’s announcement of a £23bn Productivity Investment Fund will aim to address that,  but the devil will be in the detail and delivery, as always, as each region faces its own challenges and demands.

Bonds have continued their sell-off in response to the statement, as the Chancellor confirms that borrowing will exceed initial expectations. Equities provide a more nuanced picture. Beneficiaries of infrastructure spending have been strong for some time as these moves were well flagged, and estate agencies have been hit by the ban on letting agent fees, which boosted their margins. 

Key takeaways

  • The Chancellor honoured the manifesto commitment to increase the personal tax-free allowance to £12,500 and the higher-rate tax threshold to £50,000 by 2020.
  • Launch of a new NS&I savings bond at about 2.2% gross interest to be confirmed in the spring.
  • Some salary sacrifice arrangements will lose their tax advantages from April 2017.
  • The commitment to reduce Corporation Tax to 17% by 2020 was reconfirmed.

    NS&I are set to introduce a new three-year Savings Bond with an indicative gross interest rate of 2.2% a year.  The bond will be available for a period of 12 months from spring 2017 to those aged 16 and over and will offer the flexibility to invest between £100 and £3,000. 



    The government is taking action to reduce the difference between the treatment of cash earnings and benefits. From April 2017, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed. This will mean that employees who swap part of their salary for benefits (for example private medical cover) will no longer receive tax and/or National Insurance relief on these benefits.

    Salary sacrifice arrangements which relate to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars will not be affected.

    All arrangements in place prior to April 2017 will be protected until April 2018 with arrangements for cars, accommodation and school fees protected until April 2021.



    The Money Purchase Annual Allowance (MPAA) will be reduced from £10,000 to £4,000 from April 2017. The government does not intend for there to be scope for those who have flexibly accessed their pensions to benefit from double tax relief (for example, by recycling pension drawings back into a pension) and will consult on the detail.

    Foreign pensions will be fully taxable for UK residents (currently 10% is exempt) and therefore more closely aligned with the UK’s domestic pension tax regime. The government will also close specialist pension schemes to new savings for those employed abroad. Taxing rights over lump-sum payments made to non-UK residents from funds that have had UK tax relief will now extend for 10 years after departure.



    The government has reaffirmed its intention, with effect from April 2017, to treat non-domiciled long-term residents of the UK as being deemed domiciled for all tax purposes once they have been UK resident for 15 of the past 20 tax years. Individuals born in the UK with a UK domicile of origin will also be deemed domiciled for all tax purposes while UK resident. 

    As previously announced, UK residential property held through offshore structures will be subject to inheritance tax on the death of the beneficial owner from April 2017.

    It is intended that the rules of the Business Investment Relief (BIR) scheme will also be changed to make it easier for non-domiciled individuals to bring money into the UK to invest in UK trading companies. 

    These provisions had all been signalled previously and there have been two extensive consultations. We expect draft legislation to be published shortly which will give more detail.


  • From April 2017, the employee (primary) and employer (secondary) National Insurance thresholds will be aligned, meaning both employees and employers will start to pay National Insurance on earnings above £157 per week.

  • SITR was introduced in 2014 to encourage investment in social enterprise by offering investors income tax relief in the tax year of investment or the previous year. There are also Capital Gains Tax benefits.

    The relief is to be more precisely targeted, with the limit on full-time employees of qualifying enterprises being reduced from 500 to 250 and certain activities excluded. However the SITR fundraising limit for younger companies (those existing for less than seven years) will increase to £1.5m.


  • The tax advantages linked to shares awarded under ESS will be abolished for arrangements entered into on, or after, 1 December 2016. The status itself will be closed to new arrangements at the next legislative opportunity. This is in response to evidence suggesting that the status is primarily being used as a tax planning tool rather than to support a more flexible workforce.


  • From April 2017, companies will only be able to offset up to 50% of their profits using brought-forward losses.  However, there will be greater flexibility with regard to the types of profit that can be offset by losses realised after that date.  The restriction is subject to a cap of £5m for each standalone company or group.  Large corporate groups will also face limitations on UK interest expenses they can claim from April 2017.

  • The government continues to strengthen tax avoidance sanctions and deterrents and a penalty will be introduced against those enabling others to use a tax avoidance arrangement that is later defeated by HMRC.  In addition, further investment was announced to enable HMRC to counter tax avoidance and to bring cases before the courts.

  • The government announced that it will introduce a new legal requirement to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.  In addition, they will consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and to give details of the clients involved.

    These measures continue the progress towards cross-border transparency, with a number of cross-border information exchange agreements having been implemented over the last few years.

  • Measures were announced in the 2016 Spring Budget to tackle disguised remuneration schemes used by employers and employees.  In the context of seeking fairness for all, these measures have been expanded to include the use of such schemes by the self-employed and are further discouraging employers from using the schemes unless tax and National Insurance are paid by given deadlines.

  • The Chancellor announced changes to the closure rules to tax enquiries, saying that there will be legislation to provide earlier certainty in large, high-risk and complex tax enquiries.

  • From April 2017, public sector bodies will now become responsible for identifying whether a contractor operating through a Personal Service Company should be treated as an employee.  If so, remuneration paid should be subject to deduction of tax and National Insurance in line with those paid through the payroll.

  • To improve competition and provide clarity to renters, the government will consult on banning letting agents from charging fees to tenants, for example when signing a new tenancy agreement. It is therefore likely that these costs will be charged to the landlord.

  • Following consultation, the government will legislate regarding the disproportionate tax charges in certain circumstances from policy part-surrenders or assignments.  This will allow applications to be made to HMRC from April 2017 to have the charge recalculated on a just and reasonable basis leading to fairer outcomes for policyholders.

  • The standard rate of IPT will increase from 10% to 12% with effect from 1 June 2017. Whether or not this increase is passed onto customers will depend on the approach taken by individual insurers.

Known changes taking effect from 6 April 2017

  • Phased removal of higher-rate tax relief for mortgage interest for buy-to-let investors.
  • ISA limit increased to £20,000 in April 2017. Lifetime ISAs were not specifically mentioned but the April 2017 implementation date is expected to be met.
  • New £1,000 allowances for low-level property and trading income.
  • Introduction of a main residence inheritance tax nil-rate band.
  • Significant changes to the taxation of non-domiciled individuals. Draft legislation expected on 5 December.
  • UK residential property to be subject to UK inheritance tax regardless of ownership structure.

Upcoming consultations

The government intends to consult on:

  • The valuation of taxable benefits including employer-provided living accommodation.
  • The use of income tax relief for employees’ business expenses, including those not reimbursed by their employer.
  • Bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime.


Issued by Adam & Company Investment Management Limited (Adam), which is authorised and regulated by the Financial Conduct Authority. Adam is registered in Scotland number SC102144. Financial Services Firm Reference Number 141831. Registered Office: 25 St Andrew Square, Edinburgh EH2 1AF.

The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Past performance should not be taken as a guide to future performance. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.

The information on this webpage is not intended as an offer or solicitation to buy or sell securities or any other investment or banking product, nor does it constitute a personal recommendation. The information is believed to be correct but cannot be guaranteed.

Any opinion or forecast constitutes our judgement as at the date of issue and is subject to change without notice. Nothing in this material constitutes investment, legal, credit, accounting or tax advice, or a representation that any investment or strategy is suitable for or appropriate to your individual circumstances. The analysis contained within this webpage has been procured, and may have been acted upon, by Adam and connected companies for their own purposes, and the results are being made available to you on this understanding. To the extent permitted by law and without being inconsistent with any applicable regulation, neither Adam nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such analysis.

  • Stepping up to the challenge of inheritance

    • Trust
    • Economy
    • Will
    • UK
    • Advice
    • Investments
    • Arts
    • Inheritance
    • Next Generation
    • Banking
    • Philanthropy
    • Insight
    • Property
    25 Feb 2019
    How to stay one step ahead with a bequest
  • Investment Outlook 2019 | Looking on the bright side

    • Technology
    • Banking
    • Entertainment
    • Digital
    • Economy
    • Event
    • Culture
    • Media
    • Investments
    • Insight
    09 Jan 2019
    Investment Outlook 2018 In this issue of Outlook set out the case for optimism – even in turbulent times. We also examine the importance of the soybean, discuss the power struggle in this internet age and focus on a new event in the Chinese calendar.
  • What does the Scottish Budget tell us about the economy?

    • Investments
    • Insight
    • Tax
    • Economy
    • UK
    • Budget
    13 Dec 2018
    How to protect yourself from fraud The Scottish Government’s draft Budget changed two major taxes and revealed differences in economic performance.