Interactive Investor

Autumn Statement's winners and losers

3rd December 2014 14:25

Lee Wild from interactive investor

There were few surprises in the Chancellor of the Exchequer's Autumn Statement. We knew about a massive programme of road-building, plans for three new garden cities and billions put aside for beefing up flood defences. That's already good news for housebuilders and construction companies, but George Osborne has pulled some rabbits out of the hat that not only boost the Conservatives chances at next year's General Election, but have also had an impact on share prices.

Big news here is what amounts to a Mansion Tax from the chancellor. A more sensible policy on stamp duty, which comes into force at midnight, will lower the cost of buying a home for low and middle income earners, but increase costs for more expensive homes, or mansions. Yes, it's a tax on buying a home, not owning it, but it's a tax on wealthy home buyers nonetheless.

Currently, stamp duty is charged at a single 'slab' rate of the purchase price on a home. If the price exceeds a certain rate, even by £1, the rate of stamp duty rises significantly. Now, no tax will be paid on the first £125,000, 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5 million then 12% on the most expensive homes. That means stamp duty will be cut for the 98% of homebuyers who pay it.

Housebuilders watched their share prices soar on the news – Barratt Developments jumped 5% in seconds, and Persimmon, Bellway and Taylor Wimpey all rose sharply. Gains were handed back as quickly as they came, and the shares remain jumpy as investors digest the news.

“From a market perspective this could weigh on the London-centric house builders and estate agents, for example Berkeley and Foxtons, whilst potentially favouring the more regional developers,” reckons Guy Ellison, Head of UK equities at Investec Wealth & Investment.

Abolishing air passenger duty for under 12’s and under 16’s eventually could provide a small lift to the airline industry.

But there was bad news for the so-called established banks – Royal Bank of Scotland, Lloyds and Barclays.

"Corporation Tax receipts from the banking sector have already fallen from £7.3 billion in 2006-07 to £1.6 billion in 2013-14, and it is unstainable that some banks will not be making Corporation Tax payments for another 15 to 20 years," said the chancellor.

New laws will limit the amount of profit that can be offset by credit crunch losses carried forward to 50% from 1 April 2015. That means banks will pay an extra £4 billion in taxes over the next five years.

And the chancellor's clampdown on legal tax dodging will target big multinationals, "especially in the technology sector." Think Google, Amazon and Starbucks. They'll now have to pay a 25% tax on profit from economic activity in the UK which is then artificially moved out of the country.

And there's great news for DIY investors on ISA tax reform and confirmation of pensions inheritance benefits.

"The previous ISA rules meant that all the benefits of an ISA were lost at the point of death, but the new rules, which come into effect from today, are a welcome addition and allow the tax advantages of married ISA savers to be inherited by their surviving spouse or civil partner," says Rebecca O'Keeffe, head of investment at Interactive Investor.

"This has long been an anomaly and these changes are a welcome boost for investors. This news, combined with confirmation of the end of death taxes and even more additions to how pensions can be passed on tax efficiently, make saving for your financial future even more attractive."

Elsewhere, an increase in R&D tax credits will be welcomed by both large and smaller firms, as will the Funding for Lending Scheme, which is extended for another year and will focus more on small businesses. For others, however, more will be needed to make high street banks lend to SMEs.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.