'Stealth' tax and salary perks fund Autumn Statement giveaways

Insurance premium tax increased to 12 per cent and salary sacrifice schemes scrapped

Phillip Hammond
(Image credit: Oli Scarff/Getty Images)

An increase in taxes that will affect middle earners helped fund a range of giveaways to so-called "Jams" - "just about managing" families - in today's Autumn Statement.

When Hammond's predecessor George Osborne upped the rate from 6.5 to 9.5 per cent in November 2015, it was labelled a "stealth tax" to get around self-imposed rules capping primary taxation.

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Nevertheless, the then chancellor used the tax as a relief valve again at his last Budget in March, increasing the rate to ten per cent.

The Daily Telegraph says some had expected him to go further and boost the rate to 12 per cent or more – which his successor in No 11 has now done.

Hammond softened the blow slightly by announcing a clampdown on whiplash compensation claims, which he said would save the industry money and could reduce annual car insurance premiums by £40.

Another key revenue-raising measure is the end of all salary sacrifice schemes except for those relating to ultra-low emissions company cars, that encourage cycling to work, or are used to pay for pension saving or childcare.

Consequently, from next year, employees will have to pay tax and national insurance on the likes of gym memberships arranged through their employers, increasing the cost.

These were just two measures designed to help mitigate the expense of a package of support for low and middle earners. There was also a £7bn clampdown on tax breaks for big businesses.

Among the support for hard-pressed families was a softening of the cuts to universal credit payments when a claimant starts work, as well as an increase in the tax-free personal allowance to £11,500.

Hammond also announced that fuel duty would be frozen for the seventh year in succession and that two million savers would benefit from a new NS&I bond paying a market leading 2.2 per cent.

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