Having just finished his first Autumn Statement as Chancellor of the Exchequer, Phillip Hammond announced a radical change that few had seen coming. This was to be his last Autumn Statement, as from 2017 onwards he would present a Spring Statement with the budget being moved to autumn instead.
Now that we have all had time to come to terms with such a significant alteration, and as the dust settles on the typical jeering and jostling of Parliament, we can begin to look in closer detail at Mr Hammond’s more meaningful announcements.
Below we have highlighted some of the main points raised that could impact our clients: –
Tax Allowances Increases
For 2017 the personal allowance will be increased to £11,500 (up from £11,000) whilst the threshold for 40% tax will be raised to £45,000 (up from £43,000).
It was also confirmed that the new Chancellor would stick to the timetable laid out by his predecessor with regards to the personal allowance and higher rate tax threshold rising to £12,500 and £50,000 respectively by April 2020.
This is good news for all tax payers, increasing the amount of earned income that ends up in your back pocket.
Corporation Tax Reductions
As per the announcement in the 2016 Budget, it was re-confirmed that the rate of corporation tax is to be reduced to 17% by 2020 to make it clear to the world that “Britain is open for business”. This is another welcome change that should help small to medium sized business owners to minimise their tax liability and maximise how much they can draw from their company.
However, many commentators and business leaders have expressed concerns about the rate falling any further in the near future for fear of entering into a ‘race to the bottom’ with other nations, particularly given that President Elect Trump has already suggested that he will reduce the US Corporation Tax rate to just 15%.
New National Savings & Investments (NS&I) Bond
Further to the Pensioner’s Bonds released in 2015, NS&I will offer a new type of savings account to anyone aged 16 or over from Spring 2017 onwards. With a guaranteed annual interest rate of 2.20% this sounded like a great announcement for those looking to get the most from their cash deposits.
However, with a limit of just £3,000, the numbers start to look a little less impressive. Based on this maximum deposit, the annual interest payable would be just £66. The new bond is therefore likely to be a nice boost for those with a small lump sum to invest, but a lot of administration for a relatively small benefit for anyone with a larger cash deposit.
Money Purchase Annual Allowance Reduced
As part of the new pension freedoms introduced in April 2015 a new ‘Money Purchase Annual Allowance’ of £10,000 per annum was also put in place. This was to limit the amount of any further contributions an individual could make after they had already drawn benefits from their pensions.
Since then we have not seen many cases of this actually being called into action, as the scenario of paying further contributions into a pension, whilst simultaneously drawing an income from pensions is not a common one. However, the drastic reduction in this allowance will certainly reduce the benefit of this course of action even further and for the minority of individuals who are affected by this allowance a review of their plans may be required.
Crackdown on Pension Cold Calling
The prevalence of pension cold calling and scams has increased rapidly since the introduction of the pension freedoms in 2015, as individuals have an unprecedented degree of access to their pension benefits.
We are glad to see the Government promising to ‘crack down’ on these sorts of enquiries, as they generally prey upon the more vulnerable or uninformed members of society, and ultimately harm the perception of pension flexibility.
Any Other Business
There were a number of other notable changes announced in the Autumn Statement, such as: –
- The annual ISA allowance is still to be increased to £20,000 per person with effect from April 2017.
- The abolishment of the tax and national insurance benefits of salary sacrifice schemes (excluding Pensions, Child Care and Cycle to Work Vouchers). This is an area that has been under review for quite some time and it is not surprising to see them tightening the rules around this.
- The National Living Wage will be increased from £7.20 per hour up to £7.50 with effect from April 2017.
- Commitment from the Government to inflict harsher penalties for those guilty of tax avoidance and evasion.
- A large scale investment into the UK infrastructure including new homes, research and development, transport links and communications network.
- Increase in the insurance tax premium from 10% up to 12% to help fund public sector expenses such as those above.