The most exciting announcement in the Autumn Statement was that it was to be the last Autumn Statement, with it being replaced by the annual Budget, giving more time between the Budget and the start of the next tax year in April. The traditional Budget slot in Spring will be filled with a short ‘Spring Statement’. There will be two Budgets in 2017 – the last Spring one, and the first Autumn one.
And if that’s the most exciting thing in the Budget, it’s tempting to use the disdainful shrugging teenage response – yea, like, whatever…. But there were various confirmations and tweaks, with the following being some of those most likely to have an impact on our clients.
From April 2017 the Personal Allowance, that amount of income you can receive before you start to pay income tax, will rise to £11,500; the intention is for it to rise to £12,500 by 2020.
The higher rate of tax will begin at £45,000, and the intention is that it will rise to £50,000 by 2020.
Capital Gains Tax
The 2017/18 Capital Gains Tax Allowance, that amount of gain you can make before paying tax, is still to be confirmed, but is estimated that it will be around £11,300.
Gains in excess of the allowance will be taxed at 10% (if the gain falls into the basic rate) and/or 20%. Gains relating to residential property or carried interests are taxed at 18% and/or 28%.
– there were no changes to the Inheritance Tax rules.
– there were no changes to trust rules.
Come on, you didn’t really think they would leave pensions untouched did you? That said, the changes announced were relatively minor and include:
Reduction in the Money Purchase Annual Allowance (MPAA) – This is the size of the pension contribution you can make to money-purchase pensions (essentially not salary-related pensions) once, in simple terms (there are various exemptions and detailed rules), an income has begun to be taken from a money-purchase arrangement. The MPAA is to reduce from £10,000 to £4,000.
Scams – There is to be a consultation into pension scams and cold calling. This is good news and should better protect individuals.
Overseas Transfers – the Government is looking again at this area, being conscious of the fact that they have given tax relief on UK pension funds which are then transferred overseas. The Government has already culled the number of overseas arrangements that are qualifying for transfers, and we await more announcements in this area.
Pensions and Salary Sacrifice – pension contributions are unaffected by the changes here which are noted below.
The ISA allowance will rise to £20,000 from 6 April 2017.
The Junior ISA and Child Trust Fund allowance will rise to the ridiculous and awkward figure of £4,128.
Investment Bond Taxation
The structure and tax implications of an investment bond are complex and can result in disproportionate tax charges. From next tax year individuals will be able to apply to HMRC for a recalculation of the tax on a ‘just and reasonable’ basis.
This will reduce to 19% from April 2017. The intention is to further reduce corporation tax, to 17% by 2020.
Tax Avoidance and Evasion
Various measures were announced to close the tax ‘gap’ – essentially the difference between tax that should be collected and actually is collected.
One potentially significant announcement here relates to salary sacrifice, where an employee gives up salary for another benefit. From April 2017 the replacement benefit will be subject to tax and NI in a similar way to salary. Exempted from this rule, however, are pensions, childcare, cycle to work schemes, and ultra-low emission cars. There will be transitional rules and protection for existing arrangements.
Residence and Domicile
The previously announced changes for ‘non-doms’ come in on 6th April 2017, under which individuals resident in the UK for 15 out of 20 tax years will be treated as UK domiciled for Inheritance Tax purposes.
There are also various changes relating to non-dom trusts, and non-dom trusts and companies holding UK property.
Finally, the Government will make it easier, under Business Investment Relief, for non-doms to bring offshore capital into the UK.
So the Autumn Statement 2016 was really just a series of tweaks and there were not any overhauls that had not already been announced. It’s unlikely that the Budget will be a prompt for individuals to radically change their approach or strategy in any particular area, but please contact your usual planner or via email@example.com if you would like to discuss any of the above.