What was announced in Budget 2017
Chancellor of the Exchequer, Philip Hammond delivered his Budget to Parliament on 8 March 2017. Here we highlight some of the key announcements that may impact you.
Changes expected to income tax bands from this April, have now been set in stone - an increase in the amount of income you can receive before paying higher rate tax of £1,500 to £33,500. In addition the normal personal allowance - the amount you can receive before paying income tax- is still set to increase to £11,500 from April 2017. Adding these together you could receive up to £45,000 before paying higher rate tax.
If you are a Scottish Rate tax payer your Personal Allowance is the same as well as your rate of income tax. However, the amount you can earn before paying higher rate tax will be £31,500 (totalling £43,000).
In this budget the Chancellor announced that is still on track to increase the Personal Allowance to £12,000 by 2020.
It’s worth considering carefully what you might do with any extra income!
The Government is planning to make changes to the amount you can pay into pension, before being liable to a tax charge, if you access benefits flexibly (known as the Money Purchase Annual Allowance). For the current tax year this is £10,000 - this will reduce to £4,000 for the 2017/18 tax year. If you think you might be affected by this, you should speak to your financial adviser as there are tax consequences if this affects you and you exceed this allowance. Find more information about the Money Purchase Annual Allowance and how it may affect you.
The Government is considering changing how the State Pension Age is set in future and any is expected to put forward proposals to Parliament in May. This may be important in future as you plan your retirement.
The Chancellor will increase the tax charge on pension transfers to overseas pension schemes (known as Qualifying Recognised Overseas Pension Scheme). If you are considering this option you should seek financial advice before taking any action.
The Government is getting much stricter with schemes which aggressively avoid tax - in this budget the Chancellor has announced that it will introduce further penalties for advisers and others involved in creating these.
If you are receiving dividends, you’ll probably be aware that from last April, the Government introduced a tax-free dividend allowance - meaning that the first £5,000 of any dividends received will be tax free. From April 2018 this will reduce to £2,000. So, if you are receiving dividends from shares, you’ll need to consider if this reduced allowance will affect you.
The Chancellor also confirmed that it plans to launch the new Lifetime Individual Savings Account (LISA) from this April. LISA will be available to investors between the age of 18 and 40. For more information on the Lifetime ISA visit Gov.uk.
If you are self-employed, you may be pleased to hear that introduction of quarterly reporting for business below VAT registration threshold, has been put back by a year - this may help to reduce your paper work next year. You should speak to an accountant about this.
If you are running a business and will lose business rate relief, you may still benefit from an extra ‘cap’ - meaning that your business rates will increase by no more than £50 a month. Local councils will also have additional funding to use at their discretion, so it’s worth making enquiries.
If you are running a business you may be receiving dividends. If so, you’ll probably be aware that from last April, the Government introduced a tax-free dividend allowance - meaning that the first £5,000 of any dividends received will be tax free. From April 2018 this is expected to reduce to £2,000. So, if you are receiving dividends from shares, you’ll need to consider if this reduced allowance will affect your bottom line income.
It was announced in last year’s Autumn Statement that Corporation Tax, which is a tax only paid by companies, will fall to 19% from this April. In this budget the Chancellor has confirmed that this rate will fall again by 2020 to 17%. In addition the Chancellor announced a number of incentives available to all businesses including additional funding for the private sector to invest in full-fibre broadband networks.
Changes announced in Autumn Statement 2016
- A new Savings Bond will be available through National Savings & Investment (NS&I) attracting an interest of 2.2% will be available to savers aged 16 and over from April 2017. Information is limited at the moment but savers will be expected to invest for three years with a maximum limit of £3,000.
- As previously announced, ISA limits will increase from £15,240 to £20,000 in April 2017. The government made no mention of the Lifetime Savings ISA (LISA).
- The Money Purchase Annual Allowance (MPAA) will be reduced to £4,000 (currently £10,000). Find out more about MPAA on our Tax and Allowances page.
- The Personal Savings Allowance introduced in April 2016 introducing 0% tax on interest received of up to £1,000 (basic rate tax payers) and £500 (higher rate tax payers) of interest remains unchanged in the next tax year. Additional rate tax payers (paying Income Tax at 45%) will receive no allowance.
- The higher rate Income Tax threshold (before you pay tax at 40% ) is planned to gradually increase to £50,000 by 2020. From next April, you will be able to earn up to £45,000 before you pay higher rate tax. The threshold may be different if you reside in Scotland.
- Employees will no longer receive tax savings on certain goods and services bought under Salary Sacrifice schemes and 'Benefits in Kind' from April 2017. However, pensions, childcare and some travel such as ultra-low emission cars and cycles will be unaffected. Salary Sacrifice schemes set up before April 2017 will be unaffected.
- Tax avoidance schemes will face greater penalties including those who recommend these illegal schemes.
- Insurance Premium Tax will rise from the current 10% to 12% from June 2017.
- Non-UK pension schemes will be required to align with UK pension rules.
- The triple lock guarantee in basic State pension will be retained in the next tax year (in line with the higher of increases in Consumer Price Index, National Average Earnings Index and 2.5%).
- Greater focus on tackling pensions scams and new regulations from the Financial Conduct Authority will ban cold calling for pension sales.
- The National Living Wage will rise to £7.50 from the current £7.20 from April 2017. Different amounts will apply to those aged between 16 and 24 and apprentices.
- Letting agent fees in England to be banned "as soon as possible".
- The earnings taper reduction which reduces your entitlement to Universal Credit, based on your income, will reduce from 65p to 63p for £1 of income.
- Fuel duty has once again been frozen.
- Insurance rules around ‘whiplash claims’ will be reviewed (although exact details are not known).
You may wish to speak to a financial adviser about the topics covered in the Budget. Here are some useful sites for also finding more information.
Tax rules require careful consideration and may not reflect your individual circumstances. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.gov.uk/browse/tax.
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