In contrast to the downbeat tone of Hammond and his colleagues on the Remain side during the EU referendum campaign, the chancellor was eager to talk up the ‘robustness of the economy.’
Hammond advocated the UK staying within the EU, that campaign talked of half a million lost jobs if Brexit happened.
Today as chancellor, Hammond revised up the official forecasts for UK GDP growth for this year from 1.4 per cent to 2 per cent.
He revised up his forecast for next year to 1.6 per cent and 1.7 per cent the year after, with no signs of his pre-referendum doomsday scenario on the horizon.
Hammond commented that unemployment is at an eleven year low, and made no pessimistic comments about the consequences of Brexit on the jobs market in the coming years.
The chancellor also cut his forecast for UK borrowing in the years ahead, saying that, the government would borrow £27.5 billion lower over five years.
But with the good news came a sting in the tail for investors, with the dividend tax allowance cut to £2,000 annually, down from the previous £5,000. Paul Haywood-Schiefer, of accountants Blick Rothenberg calculated that this cut will mean a £225 increase in tax. For a higher rate tax payer, a higher tax bill to the tune of £975 will happen. .
This is the allowance that company directors or investors with portfolios of greater than £50,000 pay on income received as dividends if the investments are held outside a SIPP or an ISA.
Mike Gordon, technical director at Rutherford Wilkinson, remarked that, ‘The reduction in the £5,000 tax-free dividend allowance to come into effect in April 2018 was a bit unexpected with the allowance only introduced in this tax year. For a higher rate tax payer, it would make up to £975 of difference in the amount of tax paid on dividends over the allowance. For a basic rate tax payer, it would be up to £225. These figures potentially double up where both husband and wife hold shares in the company. On other changes, it is understandable there should be no difference in tax paid between the self-employed and employed
In a widely leaked change, the chancellor announced an increase in National Insurance Contributions for the self-employed, something which his party had vowed not to do in its 2015 General Election Manifesto.
The National Living Wage rises to £7.50 an hour this year.
One boost for investors is the confirmation that the new National Savings and Investment Bond will have a yield of 2.2 per cent on investments up to £3,000.
Nancy Curtion, chief investment officer at Close Brothers Asset Management, commented, ‘
This was not the most memorable Budget on record by any stretch of the imagination, but it did bring a dose of good news. The economy has grown far faster than almost anyone expected in the aftermath of the referendum, and the brighter outlook for 2017 has made life somewhat easier for the Chancellor. The boost this growth has given to the public purse has taken the pressure off austerity, with tax receipts climbing without additional growth-threatening taxes.
He added, ‘Investors would no doubt have preferred to see a greater commitment to pro-growth investment from Hammond. Measures like the £500m investment in technology, innovation and robotics are positive, but limited in scope. It’s clear that Hammond is setting aside a fiscal shock absorber should Brexit negotiations de-rail growth, or indeed, if monetary policy changes to combat inflationary pressure.’
Kathleen Brooks, research director at City Index, commented, ‘The Chancellor’s last Spring Budget has had a fairly muted impact on the markets. There were no surprises, the budget was fiscally neutral, and not even decent upgrades to this year’s growth forecast or a rosier fiscal outlook could boost the pound.’
Read the full budget speech here