Last week (8 March) marked the last Spring Budget. Delivered by Chancellor of the Exchequer Philip Hammond, it was considered to be a “warm-up Budget” that promoted a “stronger, fairer, better Britain”. Here are some key pension, savings and personal taxation changes that might affect you:
Pensions and savings
- From April 2018, there will be a reduction in tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
- From midnight on 8 March a new 25% tax charge will be applied to transfers of pensions to overseas schemes when the saver is not living in that country
- Following a consultation launched at Autumn Statement 2016, the government will legislate in the Finance Bill 2017 to reduce the money purchase annual allowance to £4,000 from April 2017. This restricts the amount of tax relieved contributions an individual can make in a year into a money purchase pension, if they have flexibly accessed their pension savings. A response to the consultation will be published on 20 March 2017
- A new bond from National Savings & Investments will be available from April, paying 2.2% on savings of up to £3,000. The income will be taxable, although the personal savings allowance will apply
- The amount you can save into an Individual Savings Account (ISA) rises from £15,240 to £20,000 from April. This £20,000 can go entirely into a cash ISA or a stocks and shares ISAs, or be split between the two. Plus introduction of the new ‘Lifetime ISA’ for the under 40s.
- The main rate of National Insurance contributions for the self-employed to increase from 9% to 10% in April 2018 and 11% in April 2019
- The Class 4 rate is levied on earnings of more than £8,060 a year
- All Class 4 earnings above £43,000 will continue to be taxed at 2%
- Class 2 National Insurance, a separate flat rate contribution paid by self-employed workers making a profit of more than £5,965 a year, is to be scrapped as planned in April 2018
- No changes to National Insurance paid by the employed and employers or to income tax or VAT
- Personal tax-free allowance to rise as planned to £11,500 this year and to £12,500 by 2020
- The threshold for paying higher-rate, 40pc, tax will also rise from £43,000 currently, up to £45,000
- Inheritance tax nil rate band frozen at £325,000 until 2021 but the exemption extended from April 2017 for family homes. Exemption for pension funds transferred on death before age 75
If you are affected by anything mentioned in the spring budget or just want more information, advice or support, please give us a call.