Autumn Budget 2017: Loans, savings, stamp duty

Autumn Budget 2017: Loans, savings, stamp duty

With the release of the Autumn Budget 2017 on 22 November fast approaching, the AAT has called on the government to address issues relating to student loans, ISA savings, stamp duty and the apprenticeship levy in the Budget measures

With the release of the Autumn Budget 2017 on 22 November fast approaching, the Association of Accounting Technicians (AAT) has called on the government to address issues relating to student loans, ISA savings, stamp duty and the apprenticeship levy in the Budget measures.

Student loans

While the AAT acknowledged that freezing tuition fees at £9,250 and increasing the loan repayment threshold to £25,000 – as recently announced by the government – would support students, the association said that “no-one should be under any false impression that graduates have suddenly had a heavy burden lifted from their shoulders”.

The AAT said that given the annual interest applied to student debt is currently 6.1%, a graduate on a salary of £41,000 would not be able to pay off their repayments within 30 years, after which time the loan is written off. If the graduate’s salary increased by 3% each year in line with inflation, the graduate’s repayments would amount to £118,853 after 30 years with outstanding debt of £17,000.

Chief executive of the AAT, Mark Farrar, said: : “University provides many people with a great start in life, but at current levels, students really need to ask themselves whether they really wish to get into such debt so early in their lives or plan for large financial commitments such as getting onto the property ladder or saving for a pension. Likewise, with so much student debt likely to ultimately be written off over the coming years, will future governments be able to fund the gap?”

ISA savings

The AAT has voiced concern that the original aims of existing ISAs are not being fulfilled, and that the abundance of ISAs available has caused “unnecessary complexity, bureaucracy and confusion for consumers”.

For instance, while stocks and shares ISAs were originally intended to encourage individuals without shares to invest, the ISAs are now “almost exclusively” used by people who would already invest in shares.

“The original objectives of each ISA need to be reviewed, no new ISAs should be created and serious thought must be given to returning to a tax-free savings landscape that offers one or two simple ISAs which merge the most important benefits and discard any unnecessary complexity. ISA standardisation would make both their availability and features more widely understood, be more effective in encouraging saving, and also have the advantage of being more easily administered,” said Farrar.

Stamp duty

The AAT has said that it opposes calls to abolish stamp duty altogether, as losing the £11bn tax revenue a year generated by the tax would result in a significant public finance cost.

Yet, the association conceded that the current regulations represent a “significant burden” to homeowners looking to move and first-time buyers.

The stamp duty regime “stunts mobility, impacting on employment and productivity” said Farrar, as well as reducing the supply of new home, which impact the affordability of homes in the UK.

The government should consider switching liability to the seller, said Farrar.

He added that such a move would “help more people get on the property ladder, help those moving up the property ladder, increase the amount of house purchases whilst maintaining the substantial multi-billion-pound revenue for the exchequer. It will also have a positive impact on the ability to pay because it will mean that people moving up the ladder would be paying duty on the lower-priced house that they are selling, not the higher-price one they are buying.”

Apprenticeship Levy

In a survey conducted by the AAT in 2016, 65% of MPs across all parties would back an AAT proposal to develop the levy to enable funding for skills other than apprenticeships.

In addition, the AAT has suggested renaming the levy to the Skills Levy.

Farrar said: “The UK’s skills needs extend well beyond the scope of apprenticeships, and it is important to ensure the introduction of the levy ultimately recognises the varying requirements of different sectors and is aligned with industrial strategy.

“Increasing the flexibility of the levy would foster improved productivity across the whole workforce, deliver greater value for money and yet have no significant revenue implications for the Exchequer.”

Following the Autumn Budget, the government will move to hold one fiscal event each year. In 2018, a spring statement will be released, responding to the Office for Budget Responsibility forecast, but there will be no major fiscal event.

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