Autumn Statement 2016
Here's our summary of the changes Published 23 November 2016 in the Autumn statement.
The tax-free personal allowance is being increased to £11,500 in 2017-18.
For higher rate taxpayers, the Government will also increase the threshold above which higher earners start paying 40% tax. It will increase to £45,000 in 2017-18.
The Government is committed to raise the personal income tax allowance to £12,500 and the higher rate threshold to £50,000 by the end of this parliament.
Once the personal allowance reaches £12,500, it will increase in line with inflation.
Money purchase annual allowance
The Money Purchase Annual Allowance (MPAA) was introduced in April 2015 to limit the annual allowance for those over the age of 55 who are drawing down their pension flexibly while continuing to save into it.
It will now be reduced from £10,000 to £4,000 from April 2017.
The government does not consider that earners aged 55 and over should be able to enjoy double pension tax relief, such as relief on recycled pension savings, but does wish to offer scope for those who have needed to access their savings to subsequently rebuild them.
The government will consult on the detail.
Combatting pension scams
A consultation on the options for tackling pension scams including pensions cold calling will shortly be published. It is hoped this will give firms increased powers to stop suspicious transfers and abuse of small self-administered schemes.
Following a consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017. There are a few exceptions to this rule arrangements relating to: pensions, childcare, cycle to work, ultra low emission cars.
Therefore, it will still be possible for employers to use the salary exchange facility to enhance the pension benefits of their employees.
The result of these changes means employees swapping salary for benefits will pay the same tax as those who buy them out of post-tax income.
Arrangements in place before April 2017 will be protected until April 2018 with arrangements for cars, accommodation and school fees protected until April 2021.
The tax treatment of pension income and lump sums arising from a foreign pension scheme will be brought into line with the treatment of some payments from a UK registered pension scheme.
The Government will also:
a) close, to new saving, specialist occupational pension schemes operated by UK employers in respect of employees who are employed abroad.
b) extend the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief after 05/04/2006 from 5 to 10 years;
c) align the tax treatment of funds transferred between Registered Pension Schemes; and
d) update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.
Consequently, the recent trend to reduce the number of overseas pension schemes on the Government’s recognised overseas pension scheme (ROPS) list is likely to continue.
Insurance Premium Tax (IPT)
The standard rate of Insurance Premium Tax will rise from 10% to 12% from 1 June 2017.
Savings and Investments
Life Insurance/Capital Redemption policies (Assurance-Vie)
Following the part surrender and part assignment consultation, the Government will legislate in the Finance Bill 2017 to allow applications to be made to HM Revenue and Customs to have the charge recalculated on a just and reasonable basis. This will lead to fairer outcomes for policyholders. The changes will take effect from 6 April 2017.
Personal Portfolio Bonds
Following the personal portfolio bond consultation, the Government will legislate in the Finance Bill 2017 to amend the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on the Royal Assent of Finance Bill 2017.
It was confirmed the ISA limit will increase from £15,240 to £20,000 in April 2017.
NS&I Investment Bond
NS&I will offer a new 3 year Investment Bond with an indicative rate of 2.2% from spring 2017. Savings of between £100 and £3000 can be made to savers aged 16 or over.
Residence and Domicile
As previously announced, From April 2017, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, (previously 17 out of 20 years) or if they were born in the UK with a UK domicile of origin.
Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust
From April 2017, UK property held indirectly by a non-domiciled individual through an offshore structure (for example a company or trust) will become liable to inheritance tax from April 2017, as expected.
The Business Investment Relief (BIR) scheme will also be simplified from April 2017 to encourage non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses.
The government confirmed that following the fall to 19% from April 2017, there will be further reduction of the corporation tax rate to 17% in 2020.
A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. The penalty is intended to ensure that those who help people tax avoiders whose tax avoidance schemes are defeated by HMRC also face the consequences.
Tax avoiders will not be able to use the defence of taking reasonable care by relying on non-independent tax advice.
The information provided is based on our current understanding of the 2016 Autumn Statement and associated documents and may be subject to alteration as a result of changes in legislation or practice.
The information provided in this article is not intended to offer advice.