What was announced in Autumn Statement 2016
Here are the key points from this year’s Autumn Statement.
National Insurance and Pensions
- The thresholds for the starting point for National Insurance contributions paid by employers and employees will be aligned (there will be no additional costs to employees). This is estimated to cost employers an additional £7.18 per year, per employee.
- Employee shareholder schemes will be reviewed as the Government believes these are open to abuse and potential tax avoidance.
- Salary sacrifice will change – this is where the employee gives up salary which is used by the employer to buy other benefits for the member. Many benefits will not be allowable through salary sacrifice, although these changes specifically exclude pensions contributions and advice, childcare and some travel such as ultra-low emission cars and cycle to work schemes, as will some long-term arrangements until April 2021.
- It is proposed that the Money Purchase Annual Allowance (MPAA) will be reduced from £10,000 to £4,000 (currently £10,000) from next tax year to reduce tax relief which may be gained through ‘re-cycling’ pensions drawn down. A consultation paper has been issued, with a view to confirming the position in the Spring 2017 Budget.
- The triple lock guarantee in basic State pension will be retained (in line with the higher of increases in Consumer Price Index, National Average Earnings Index and 2.5%) until 2020. There will be a review of the mechanism.
- There will be greater focus on tackling pensions scams and new regulations from the FCA will ban cold calling for pension sales (more information is anticipated on this).
- Tax treatment of overseas pensions to be aligned with those for UK pensions.
- From next year the Government will introduce a new Saving Bond through NS&I – 2.2% fixed for 3 years. More details will follow in the next Budget.
Tax and Allowances
- The Personal Allowance will increase from £11,000 to £11,500 as anticipated in April 2017 (resulting in an estimated 28m people paying lower income tax). This will rise to £12,500 in 2020, and increase thereafter by inflation.
- The upper earnings limit for National Insurance contributions increases from £43,004 to £45,032, increasing the NI contributions paid by employees earning over £43,004.
- The Government plans to raise the Higher Rate income tax threshold for UK tax payers to £50,000 by the end of this Parliament (2020).
- National Minimum Wage is set to increase from £7.20 to £7.50 in April 2017 (an increase of £500 per year for a full time worker.
- The taper rate at which Universal Credit is withdrawn as earnings rise to be reduced. Certain benefits are excluded from the cap, e.g. Disability Living Allowance.
- Once again the Government cancelled its planned increase in Fuel Duty. This is the 7th occasion and the longest period of no increases in 40 years.
- Insurance rules around ‘Whip lash claims’ will be reviewed (although exact details are not known).
- Last Autumn Statement – from Autumn 2017 the Autumn Statement will become Autumn Budget (setting tax/NI rates for the next tax year) with the Spring Budget becoming the Spring Statement.