The Chancellor confounded predictions of wholesale tax rises in the Autumn Budget and instead presented a surprisingly generous package of measures.
Being keen to signal the beginning of the end of austerity, Mr Hammond was able to make use of the OBR’s news that tax receipts had been better than expected to provide extra spending for the NHS, including mental health services, potholes, the High Street, defence, housing, the environment and more.
Much was made of the unexpected income tax savings announced in the Budget, especially the increase in the higher rate threshold. However, it was not until the next day that the revised National Insurance thresholds were quietly released.
The main rate of National Insurance for employees is 12pc while for the self-employed Class 4 National Insurance is charged at 9pc on profits. The new thresholds show that the upper earnings limit, the point at which the full rate decreases to 2pc, has also been raised to £50,000.
For those with employment income, this amounts to a clawback of half of the tax saving announced on Budget day, while the self-employed will see an increase in their National Insurance bill of £227. What is given with one hand is often taken away with the other.
The Chancellor’s plans largely depend on the performance of the economy. An increase in the Annual Investment Allowance for capital expenditure from £250,000 to £1m for two years was one of the measures intended to kick start business investment and increase productivity.
Some were predicting the abolition of entrepreneurs’ relief but instead the minimum qualifying period was extended from 12 months to two years. This will save the government money in respect of those businesses which fold or are sold within the first two years while still preserving an incentive for entrepreneurial activity.
The big question hanging over the Chancellor’s plans is Brexit. Mr Hammond did not shy away from stating that another Budget in the spring was a possibility depending on whether a deal is reached. Everything could change between now and then, with not only another Budget but, who knows, perhaps a different Chancellor.