What was announced in Autumn Statement 2016
The Chancellor of the Exchequer, Philip Hammond delivered his first Autumn Statement to Parliament in November. Here we highlight some of the key announcements that may impact you.
Personal Allowance (the amount of income you may receive before you pay Income Tax) will increase from the current £11,000 to £11,500 in April 2017. This was previously announced in the March Budget.
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.
- 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.
- 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.
- 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.
- Tax avoidance schemes will face greater penalties including those who recommend these illegal schemes.
- 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.
- Insurance Premium Tax will rise from the current 10% to 12% from June 2017.
- 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 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).
Changes announced in Budget 2016
A new Lifetime ISA was among a raft of changes to savings and taxes announced by the previous Chancellor, George Osborne, in his Budget to Parliament on 16 March 2016.
• ISA limit will increase from the current £15,240 to £20,000 from April 2017. This will include contributions to the new Lifetime ISA.
• A new Lifetime ISA will be offered to adults under age 40 from April 2017. Savers can contribute up to £4,000 each tax year with the Government adding £1 each year for every £4 saved which may be used to build up a retirement pot or purchase a first home. It will be possible to save up to £4,000. Further restrictions may apply depending on what you use the money for.
• The Government may allow other ISAs to be rolled up into these schemes but this is currently under consideration and not decided. They may also allow further savings in excess of the £4,000 annual limit, or beyond age 50, without the government bonus. The Government has produced a factsheet on the Lifetime ISA which you can read for further information.
• The Government will introduce a new state-backed savings scheme for low-paid workers, worth up to £1,200 over four years which will include a 50% government bonus after two years.
• Personal Allowance (the amount of income you may receive before you pay tax) will increase from £11,000 (April 2016) to £11,500 in April 2017.
• The higher rate threshold (before you pay 40% Income Tax ) will increase to from £43,000 (April 2016) to £45,000 in April 2017.
• Individuals with savings income may be eligible to receive this tax free as a result of a new Personal Savings Allowance. Limits to the tax-free amount depending on individuals tax position:
- Non tax payers - up to £5,000 tax free.
- Basic rate tax payers (20%) - up to £1,000.
- Higher rate tax payers (40%)- up to £500.
- Additional rate tax payers (45%) - £0.
• Capital Gains Tax (CGT) is a tax that you pay on any profit you make on the sale of certain assets. CGT reduces from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate tax payers from April 2016. It is worth noting that whilst CGT does not apply to the sale of the home you live in, if you sell any investment property, the CGT rates of 28% and 18% will still apply.
• Class 2 National Insurance contributions will be abolished for the self-employed, although they will still be subject to Class 4 National Insurance.
• The upper limit of income which is subject to National Insurance has increased which means that you could end up paying more.
New stamp duty rules came into force in April 2016 as expected. This means that a 3% tax charge now applies to anyone purchasing buy-to-let properties or second property. In Scotland, a similar 3% charge also applies to additional property transactions.
• Insurance Premium Tax (IPT) which you pay on many types of insurance product, including household insurance, will rise by 0.5%.
• Fuel duty has once again been frozen.
• As have duty rates on beer, spirits and most ciders.
• Tobacco prices increased by 2% above inflation.
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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