Last Wednesday (23 November) marked the first Autumn Statement by Chancellor of the Exchequer Philip Hammond. It will also be his last, as Mr Hammond announced the Budget will now be in the autumn. There will be a simplified Spring Statement from 2018 onwards. Here are some key pension, savings and personal taxation changes that might affect you…
- There were no changes to current levels of pension tax relief, as many had feared. However, new measures have been announced to clamp down on the recycling of pensions savings by over 55s by restructuring the money purchase annual allowance (MPAA). Over £7bn has been taken out via pensions freedoms so far. For those that have already accessed their taxable pension savings, HMRC have started a consultation period, which ends on 15 February 2017, when they will decide whether or not the MPAA should be reduced from £10,000 to £4,000 per annum.
- The pensions “triple lock” that has protected state pensions since 2010 will be maintained until the end of the current parliament, despite heavy pressure from MPs. The triple-lock guarantees that state pensions rise by the same as average earnings, the consumer price index, or 2.5 per cent, whichever is the highest.
- Pensions tax relief. From April 2016, this measure restricts pension tax relief by introducing a tapered reduction in the amount of the annual allowance for individuals with an adjusted income of over £150,000 and a threshold income over £110,000.
- Government plans to tackle pension scams were confirmed, including banning cold calling.
- August’s interest rate cut prompted high street banks to slash rates, but the chancellor promised a new “market leading” savings bond from Premium Bonds issuer National Savings & Investments (NS&I). He said it would be launched after the Spring Statement next year, to help those with “modest savings” who have suffered from low interest rates. With a gross interest rate of 2.2 per cent over a three-year term, savers can invest up to £3,000. The government expects 2m people to apply.
- ISA allowances are to increase to £20,000pa from April 2017 and a new ‘Lifetime ISA’ for the under 40s will be introduced.
- Capital gains tax. From 2016, tax rates were reduced to 10% for basic rate taxpayers and to 20% for higher rate taxpayers, except on residential property where the rate will remain at 28%. . Entrepreneurs’ relief continues with tax rate of 10% for lifetime gains of £10 million per individual with 10% relief extended to individuals on private trading company shares held for over 3 years.
- Inheritance tax – nil rate band frozen at £325,000 until 2021 but the exemption extended from April 2017 for family homes (though there are strict criteria as to who the beneficiary is).
Salary Sacrifice Schemes
- Tax and National Insurance benefits of salary sacrifice schemes will be removed from 6 April 2017, meaning they will be liable to the same tax treatment as cash income, with the following exceptions:
– Pensions (including pension advice)
– Cycle to work
– Ultra-low emission cars
All other salary sacrifice arrangements in place before 6 April 2017 will be protected until 5 April 2018, and salary sacrifice arrangements in place before 6 April 2017 for cars, accommodation and school fees will be protected for up to 4 years (until 5 April 2021).
- Investment bonds. There will be legislation introduced in the Finance Bill 2017 allowing policyholders to apply to HMRC to have their chargeable event gain recalculated on a just and reasonable basis where there has been a part surrender or part assignment of their investment bond. This measure will take effect from 6 April 2017.
- Insurance premium tax. This is to rise from 10% to 12% in June 2017.
- Income tax. The personal allowance will rise to £12,500 by the end of Parliament and in line with the CPI thereafter. The higher rate threshold is set to rise to £50,000 over the same period.
If you are affected by anything mentioned in the Autumn Statement or just want more information, advice or support, please give us a call.