UK investment shows signs of slowing, says ONS

January 28th, 2017

The Corus steelworks in Port Talbot, South Wales. The ONS said there were signs business investment growth was starting to slow.

Consumer spending and retail growth are stronger but manufacturing is falling back, figures show.

British businesses are becoming more reluctant to spend, according to the Office for National Statistics, as the UK relies heavily on consumers to prop up the post-Brexit vote economy. In its latest monthly snapshot of the UK economy, the ONS said there were signs that business investment growth was starting to slow. Investment by companies grew by 0.9% in the third quarter, down from 1% in the previous quarter. It fell by 1.6% on an annual basis.

“While there has been stronger consumer spending and retail growth, the contribution from investment has showed signs of waning slightly in recent quarters,” the ONS said.

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Bank of England must be wary of interest rate rise, says chief economist

January 21st, 2017

The Bank of England

Andy Haldane says UK at risk of sharp slowdown as BoE weighs up conflicting forces of inflation from weak pound and the Brexit vote denting confidence. The Bank of England should be wary of rushing into interest rate rises to curb inflation, according to its chief economist, in a warning that the UK economy is vulnerable to a sharper slowdown next year than forecasts would suggest.

Andy Haldane said he was comfortable with the Bank’s current wait-and-see stance on borrowing costs as it weighs up the conflicting forces of a lower pound stoking inflation and the Brexit vote denting business confidence. In a bid to shore up confidence after the referendum, the Bank cut interest rates to a record low of 0.25% in August and expanded its programme of electronic money-printing, known as quantitative easing (QE). It had hinted at another interest rate cut before the end of the year but a flurry of brighter than expected economic news forced the Bank to row back on that guidance. Haldane said on Friday that economic output had outperformed the expectations of the Bank’s monetary policy committee (MPC) back in August while inflation had picked up, largely as a result of the pound’s sharp fall since the referendum, which makes imports to the UK more expensive. “That configuration now leaves me comfortable with the current stance of monetary policy, with no bias on the direction of the next move in interest rates,” he said.

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Top 1.5 per cent of earners to pay £20bn more in income tax

January 15th, 2017

The Chancellor

Half of all additional income tax collected by the Government by 2021 will be paid by the top 1.5 per cent of earners as hundreds of thousands of people are dragged into paying the top rate, figures have shown. Just 469,000 people earning more than £150,000 a year will account for almost £20 billion of additional income tax paid to the Treasury, a record high according to the Office for Budget Responsibility (OBR).

Senior Conservative MPs on the Treasury select committee called on Philip Hammond, the Chancellor, to look again at the tax system in the wake of the figures and warned that the burden should be spread more widely. The number of people paying the additional 45 percent rate has increased from 0.75 percent in 2010 to 1.1 percent today and will rise further to 1.5 per cent in 2021 as a result of the threshold being frozen by successive Chancellors. More people will pay no tax at all on their income in 2021 than those who pay the top rate, OBR analysis has shown. But there are fears that additional rate taxpayers may choose to move their money into incorporated companies instead, in order to avoid higher tax bills.The OBR estimates the Government may lose more than £3 billion in tax it expects to bring in from those earning more than £150,000 a year because of such a  shift.

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“Not enough time” to implement MTD by 2018, says Tyrie

January 12th, 2017

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ANDREW TYRIE has suggested there will not be enough time to implement Making Tax Digital (MTD) by April 2018.

In correspondence between Andrew Tyrie, chairman of the Treasury committee and Jane Ellison, financial secretary to the treasury, the government’s response for MTD consultations were discussed, with Tyrie outlining a lack of time to implement the controversial tax reporting regime by the planned date. Mr Tyrie said of the correspondence: “It is welcome that the government has decided not to rush its response to HMRC’s consultation. But this may mean that there is insufficient time for adequate consultation to take place on the draft clauses, once published.”

Page 41 of the Autumn Statement document states: “In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.”

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Inheritance tax payments reach record high: how to protect yourself

January 8th, 2017

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The amount of the money the UK government has received from inheritance tax (IHT) has reached £4.7 billion for the year ending 31 October. This is up 11.9 per cent from a total of £4.2 billion in the year ending 31 October 2015.

According to Wilsons, a law firm that specialises in private client law (among others), more and more people’s estates are leaving the tax free threshold behind due to the inflation in house prices, along with a freeze on the threshold level itself.

Essentially, owners of modest homes have found themselves being grouped with the rich.

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Inheritance tax shocker: Some families will pay 80pc

January 3rd, 2017

Sky high: this seven-storey Georgian house is £14 million with Harrods Estates

Despite Government claims that family homes will be passed on free of inheritance tax from April, some children and grandchildren will find they are left with an 80pc tax bill. Former Chancellor George Osborne unveiled the new “residence nil rate band” which is given in addition to the usual inheritance tax allowance of £325,000 per person. From April 2017 each person will have an extra £100,000 allowance to add to the £325,000. This is set to gradually rise until the residence allowance reaches £175,000 in 2020/21, giving a total IHT-free limit of £1m for a couple.

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Britain’s economy could face £84bn black hole post-Brexit

November 29th, 2016

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Britain’s economy could face a black hole of £84bn ($102.3bn) by the time the Chancellor sets out his spending plans in the Autumn Statement next month, a think tank has warned.

According to a report from the Resolution Foundation, the deteriorating economic outlook, increased spending and lower tax receipts in the aftermath of Brexit could leave the government facing a shortfall until 2020-21.

The think-tank warned the Treasury would face a £23bn deficit at the end of the parliament, meaning the government would have to find a combined £84bn to balance the books over the next five years. However, the Foundation added, the only way to do so would be by implementing cuts or allow for extra borrowing.

George Osborne’s pledge to achieve a budget surplus by 2020 has already been abandoned by the government, which by then could be confronted with an economy £60bn smaller than it was expected to be before the referendum.

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UK economy is braced for interesting times as Brexit phoney war end

November 26th, 2016

Theresa May and Philip Hammond

The four months since the Brexit vote have been something of a phoney war. Life for most has trundled on just as before. The shops have been full. Employment has continued to rise. Britain is still the low pay, low productivity country it always was. If someone had left in early June and returned today without access to the news, they would never know there had been a referendum.

The release of the growth figures for the third quarter of 2016 on Thursday will reinforce the sense that not much has changed.

In August, the Bank of England expected the economy to almost stall but it has had second thoughts in the light of more upbeat data. The consensus in the City is for growth of 0.3-0.4%, down on the second quarter but hardly a disaster.

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UK support for Nissan may be costly, hard to calculate

November 17th, 2016

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LONDON, Oct 27 (Reuters) – The support that the UK government has promised carmaker Nissan in return for building new models in Britain could prove expensive, but the Japanese carmaker’s complex structure makes it hard to estimate.

Nissan announced on Thursday it would build the new Qashqai and the X-Trail SUV in Sunderland, England, after saying in September it would only commit to new UK investment if it got a promise of compensation should Britain’s move to leave the European Union lead to new taxes on car exports.

Nissan’s main UK arm sells vehicles worth 5.3 billion pounds ($6.5 billion) a year, its accounts show. It says 55 percent of the cars go to Europe, suggesting exports of about 2.9 billion.

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Private contractor Concentrix to lose HMRC tax credit contract six months early

November 15th, 2016

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Staff will not be losing their jobs

The private contractor accused of incorrectly stopping the tax credits of thousands of low income families will lose its contract six months early, staff at the firm have been told.

HMRC had already announced that Concentrix’s contract would not be renewed when it expired in 2017 – after a spate of stories that suggesting the tax authority and its contractor had stopped tax credits on the basis of “flimsy” evidence.

A staff bulletin said discussions were continuing about the remaining period of the contract, adding that Belfast-based staff will automatically transfer to HMRC.

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