Autumn Statement 2016

24th November 2016

We like to keep our clients updated on tax matters, and yesterday we were focused on Philip Hammond’s first, and last, Autumn Statement. This update sets out the main changes to tax rates and allowances. It also aims to identify other notable changes which may be of interest to our clients.

Income Tax

Personal allowance will increase to £11,500 in 2017/18.
Higher rate tax threshold will rise to £45,000 in 2017/18.
Income tax rates, 0% starting rate on savings income up to £5,000, and additional rate threshold all remain unchanged for 2017/18.
The government remains committed to delivering a personal allowance of £12,500 and higher rate tax threshold of £50,000 by the end of the current parliament.

Capital Gains Tax (CGT)

There was no mention of any change to either the rates of CGT or the £11,100 annual exempt amount.

Inheritance Tax (IHT)

We already know that the nil rate band is frozen at £325,000 until April 2021 and that the residence nil rate band being introduced for 2017/18 will start at £100,000, rising in equal instalments to reach £175,000 in 2020/21.

From Royal Assent of the Finance Bill 2017/18, IHT relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections.

Corporation Tax

The intention to reduce the rate of corporation tax to 17% by 2020 has been reaffirmed.

Pensions

Pension scams – a consultation will soon be published on options to tackle pension scams, including banning cold calling, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse rules that apply to SSASs (a type of company pension)..
Salary sacrifice – pension contributions can continue to be made via salary sacrifice arrangements but this had already been confirmed as part of the consultation process in August 2016.
The Money Purchase Annual Allowance (MPAA) is the limit on new pension contributions for individuals who have flexibly accessed pension benefits since April 2015. The limit is currently £10,000 and the plan is to reduce this to £4,000 from April 2017. We will be contacting any clients affected by this change if it is confirmed.

ISAs

The 2017/18 annual subscription limit for ISAs will rise to £20,000 as announced at Budget 2016.
Junior ISAs and Child Trust Funds annual subscription limits will see a CPI linked rise to £4,128 in 2017/18.

Investment bonds and life policies

Further to the Budget 2016 announcement and following consultation, the government will legislate in Finance Bill 2017 regarding the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments. This will allow applications to be made to HM Revenue and Customs (HMRC) to have the charge recalculated on a just and reasonable basis. The changes will take effect from 6 April 2017. In our view, the disproportionate tax charges can be avoided simply by seeking advice from Innes Reid.
As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to create a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes, which again we await details of, will take effect on Royal Assent of Finance Bill 2017.

Other Measures

NS&I Investment Bond – new three year savings bond to be launched to help savers who have struggled with low interest rates. The indicative rate is 2.2% but this is subject to change. Savers aged 16+ will be able to invest between £100 and £3,000 and the bond will be available for 12 months from Spring 2017.
Salary sacrifice – following consultation (back in August 2016), the tax and employer NI advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work, and ultra-low emission cars. This will mean that employees exchanging salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018; and arrangements for cars, accommodation and school fees will be protected until April 2021.
Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.
A ban on Letting Agent fees for tenants. This is intended to improve competition in the rental market and make fees for renters more transparent. There will be a consultation on this from the Department for Communities and Local Government (DCLG) before it is written into legislation.