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We weren’t expecting too many financial planning surprises in the Autumn Statement and the biggest news was the Chancellor's decision to abolish the Autumn Statement. Following the spring 2017 Budget and Finance Bill, the actual Budget will be delivered annually in the autumn, with Royal Assent taking place before the tax year begins. We have summarised some highlights of the budget below after a summary of the UK's economic performance to date as set out in the budget itself. The full 2016 budget policy paper is available on the gov.uk website.
We weren’t expecting too many financial planning surprises in the Autumn Statement and the biggest news was the Chancellor's decision to abolish the Autumn Statement. Following the spring 2017 Budget and Finance Bill, the actual Budget will be delivered annually in the autumn, with Royal Assent taking place before the tax year begins. We have summarised some highlights of the budget below after a summary of the UK's economic performance to date as set out in the budget itself. The full 2016 budget policy paper is available on the gov.uk website.
Summary of economic performance to date
Since 2010,
the government has made huge progress in turning the economy around following
the Great Recession. The employment rate is at a record high and the deficit
has fallen by almost two thirds. But more needs to be done. The deficit remains
too high and productivity too low. In addition, the government wants to see
more people sharing in the UK’s prosperity and ensure that the tax system is
one where everyone plays by the same rules.
In the near
term, the UK’s economic outlook has become more uncertain. The British people’s
decision to leave the EU presents new opportunities, but also new challenges.
The Autumn Statement sets out policies which support the economy during this
transition. Alongside the forthcoming Industrial Strategy it prioritises
investment to improve productivity and ultimately living standards. It provides
certainty for business to secure investment and create jobs; and reprioritises
spending to build an economy that works for everyone.
Personal Tax
Personal Allowance - 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 has said that it is committed to raising the tax allowance to
£12,500 or £50,000 for higher rate tax payers by the end of this parliament,
once it has reached that goal then the personal allowance will increase in line
with inflation.
Salary Sacrifice - 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 and ultra low emission cars. The result of
these changes mean employees swapping salary for benefits will pay the same tax
as those who pay for them out of post-tax income. Existing arrangements are
protected until April 2018 with arrangements for cars, accommodation and school
fees protected until April 2021.
National Insurance – The National
Insurance secondary (employer) threshold and the National Insurance primary
(employee) threshold will be aligned from April 2017, resulting in some
additional cost to employers. Class 2 NICs will be abolished from April 2018.
Thereafter, the self-employed contributory benefit entitlement will be accessed
through Class 3 and Class 4 NICs.
Pensions and Savings
ISAs and Bonds - The annual ISA limit is
being increased to £20,000 with effect from 6 April 2017, while the 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.
Starting rate for savings – The band of
savings income that is subject to the 0% starting rate will remain at its
current level of £5,000 for 2017-18.
Foreign pensions - 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.
Pension scams - The Government will
publish a consultation shortly on options to tackle pension scams, including
banning cold calling in relation to pensions, giving firms greater powers to
block suspicious transfers, and making it harder for scammers to abuse ‘small
self-administered scheme (SSAS) arrangements.
Corporation Tax
Business Tax Road Map - The new
Chancellor confirmed his commitment to the business tax road map set out by
George Osborne. This includes cutting the rate of corporation tax to 17% by
2020.
Non-resident companies to enter UK Tax
Regime - The Government announced its plans to bring all non-resident companies
receiving taxable income from the UK into the corporation tax regime. At Budget
2017, the Government will consult on the case and options for implementing this
change.
Tax Administration
Tax Avoidance - 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.
VAT Flat Rate Scheme - A new 16.5% rate
is to be introduced from 1 April 2017 for businesses with limited costs, such
as many labour-only businesses, to ensure that the scheme is used only as
intended.
Requirement to register offshore
structures – The Government will consult on a new legal requirement for
intermediaries arranging complex structures for clients holding money offshore
to notify HMRC of the structures and the related client lists.
References
1. Old Mutual Wealth Autumn Statement 2016 Analysis
2. OneE Group Ltd Autumn Statement 2016 Analysis
3. Gov.uk Policy Paper: https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016
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