Several pension changes are being enforced from April 6 this year, thanks to announcements made in George Osborne’s Budget last year:
- Anyone on the flat-rate state pension will see their weekly payments go up by £3.90.
- From April 6, the state pension will rise by 2.5 per cent, meaning that those on the new flat-rate state pension will see their weekly payments increase from £155.65 to £159.55.
- While those on the old state pension will see their weekly payments go from £119.30 to £122.30.
The lifetime allowance will also change from April 6, meaning that the amount people can put into their pension pots over their lifetimes – while qualifying for tax relief – will drop from £1.25 million to £1 million.
- The Spring Budget documents do mention the state pension age, which is currently be reviewed and could rise into the early mid-seventies.
- If you have started to take your pension, how much you can then pay into your pension under the Money Purchase Annual Allowance (MPAA) and get tax relief on is being cut from £10,000 to £4,000 from April 2017.
- From 9 March 2017, transfers from UK Registered Pension Schemes to Qualifying Recognised Overseas Pension Schemes (QROPS) will be subject to a special 25% tax charge unless both the individual and the QROPS are in the same country after the transfer or other specific conditions apply.
The Personal Allowance
- The Personal Allowance will rise from £11,000 to £11,500 in 2017/18. The point at which higher rate income tax kicks in will increase from £43,000 this year, to £45,000 in 2017/18. Once the Personal Allowance reaches £12,500 (planned for 2020), it will increase in line with inflation.
- The £5,000 tax-free allowance, which only arrived in 2016, is being cut to £2,000 from April 2018. This measure aims to raise approx. £1b pa by 2020 and is an attempt to discourage incorporation (approx. 657,000 companies were incorporated in 2016). It will hit both company owners who draw dividends, as well as shareholder investors more widely. Typically, general investors will need over £50,000 worth of stocks and shares outside an ISA to be affected.
- National Insurance contributions: increasing for the self-employed
- As already announced, Class 2 National Insurance Contributions (NICs) for the self-employed will be abolished in 2018. However, Class 4 NICs will increase from 9% to 10% in April 2018 and go up to 11% the following year.
Non domiciled individuals
- As announced at Summer Budget 2015, from April 2017 non-UK domiciled individuals (‘non-doms’) will be deemed domiciled in the UK for tax purposes where they have been UK resident for 15 of the past 20 tax years. Additionally, individuals who were born in the UK with a UK domicile of origin, but have acquired a domicile of choice elsewhere, will be deemed UK domiciled for all tax purposes while they are UK resident. Non-doms who set up a non-UK resident trust before becoming deemed domiciled in the UK will not be taxed on any income and gains retained in that trust.
Universal Credit taper will be reduced from 65% to 63%
- In Universal Credit, as a person’s income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person’s salary increases. Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. They will now keep 37p for every £1, from April 2017.
Stamp Duty Land Tax: accelerating receipts
- As announced at Autumn Statement 2015, the government consulted in 2016 on a reduction in the Stamp Duty Land Tax (SDLT) filing and payment window from 30 days to 14 days, as well as on the SDLT filing and payment process generally. After consideration of the responses, the government will delay the reduction in the filing and payment window until after April 2018.
Savings and investments
Junior Individual Savings Accounts (ISAs) and Child Trust Fund limit
- The annual subscription limit for Junior ISAs and Child Trust Funds will be up-rated in line with the Consumer Prices Index (CPI) to £4,128.
- The ISA subscription limit increases from £15,240 to £20,000 from 6th April 2017. All types of ISA subscription use up part of this limit (except Junior ISA subscriptions).
Lifetime ISA (LISA)
- In the Budget last year it was also announced that a new “Lifetime ISA” would be launched in April 2017, helping young people get onto the property ladder or save for retirement.
- The ISA, which will be available for those aged 18-39, will allow people to save tax-free with the bonus that the government will top up the savings by 25 per cent.
- Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
New National Savings bond
- A new savings bond will be available through National Savings & Investment (NS&I) from April 2017. The Chancellor has confirmed that the bond will have an interest rate of 2.2% gross, and a term of three years. Savers over the age of 16 will be able to deposit up to £3,000, with a minimum investment of £100.
Life insurance policies – part surrenders and part assignments
- The tax rules for part surrenders and part assignments of life insurance policies will be changed to prevent excessive tax charges arising on these products. The legislation is due in Finance Bill 2017, following consultation.There will also be a consultation on changes to the categories of assets that life insurance policyholders can choose to invest in without giving rise to an annual tax charge under the personal portfolio bond legislation.
- There will be no change to what has been previously announced; the rate of Corporation Tax will continue to be reduced in stages to 17% by 2020/21. These measures aim to make the UK competitive from a tax perspective and attractive to foreign investors.
Tax-advantaged venture capital schemes
The Government will amend the requirements of the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). These amendments:
- clarify the EIS and SEIS rules for share conversion rights – for shares issued on or after 5 December 2016 rights to convert shares from one class to another will be excluded from being an arrangement for the disposal of those shares within the ‘no pre-arranged exits’ requirements for the EIS and SEIS;
- provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures, to align with EIS provisions, for investments made on or after 6 April 2017;
- introduce a power to enable VCT regulations to be made in relation to certain share-for-share exchanges to provide greater certainty to VCTs, which will take effect on the date from which Finance Bill 2017 receives Royal Assent.
Business Rates changes in England
- There will be £435 million to support businesses affected by the business rates relief revaluation, meaning no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016-17.
- Included in the above figure, there will be funding for local authorities will allow them to provide £300 million of discretionary relief to provide help to businesses most affected by the revaluation. From April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.
- New measures to combat tax evasion and tax avoidance aim to raise £820m, plus a new financial penalty will be introduced for professionals who promote tax avoidance arrangements which are later defeated by HMRC.
- £2 billion for adult social care over the next three years to help councils to provide high quality social care to more people and help to ease pressure on the NHS. A Green Paper will be published later this year looking at the long term financing of social care.
- Tax-Free Childcare will provide up to £2,000 a year in childcare support for each child under 12 (up to £4,000 for disabled children up to the age of 17). Parents of younger children will be able to apply for the scheme first, with all eligible parents able to access the scheme by the end of the year.
For further help with any aspect of your financial planning needs, please don’t hesitate to call the advisers at Bread and Butter Advice on 0844 770 7726.