We have summarised some of the key changes introduced in the Chancellor’s Autumn Statement:
Money Purchase Annual Allowance
It has been proposed that the money purchase annual allowance is to reduce from the current level of £10,000 to £4,000 from 6 April 2017. The reason given for the reduction is to prevent earners aged 55 and above recycling their pension savings and effectively enjoying double pension tax relief. The government will consult on the detail.
The government will shortly publish a consultation 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 schemes’.
The State Pension is protected by a triple lock, which means that it increases each year in line by the higher of inflation, the increase in average earnings or 2.5%. In his speech the Chancellor confirmed the pledge to keep the triple lock to the end of the current Parliament, but also announced the policy would be reviewed in the next Parliament.
National Insurance Contributions
The NICs rates for 2017/18 are as follows –
- The lower earnings limit increase from £112 per week to £113 per week
- Primary threshold increase from £155 to £157 per week
- Secondary threshold increase from £156 per week to £157 per week
- The upper earnings limit will increase from £827 per week to £866 per week
The secondary (employer) threshold and the primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying National Insurance on weekly earnings above £157.
The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to –
- Pensions (including advice)
- Cycle to Work
- Ultra-low emission cars.
This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
As previously announced, the income tax personal allowance is to increase to £11,500 for 2017/18 and the basic rate limit will increase to £33,500. These changes will increase the higher rate threshold above which individuals pay income tax at 40% to £45,000 for 2017/18.
Also announced was the commitment to increase, in this Parliament, the personal allowance to £12,500 and the higher rate threshold to £50,000, after which both will increase in line with the Consumer Prices Index (CPI). The band of savings income that is subject to the 0% starting rate will also remain at its current level of £5000 for 2017/18.
The current nil rate band of £325,000 will remain frozen at this level until April 2021. From April 2017 an additional nil rate band will apply where a residence is passed on death to a direct descendant. The residence nil rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets are passed on death to direct descendants.
Individual Savings Account
As previously announced the ISA subscription limit will increase from £15,240 in the current tax year to £20,000 in 2017/18. In addition the Chancellor announced that the Junior ISA subscription limit will increase from £4,080 to £4,128 in line with the consumer price inflation figure.
Life Insurance Changes
As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 regarding the disproportionate tax charges that can arise in certain circumstances from life insurance bond part-surrenders and part-assignments. This change is expected to allow applications to be made to HM Revenue and Customs (HMRC) to have a tax charge recalculated on a “just and reasonable” basis, in order to drive fairer outcomes for policyholders. The changes will take effect from 6 April 2017.
Also announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to take a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent of Finance Bill 2017.
The current rate of corporation tax is 20%. The chancellor also confirmed his commitment in the Autumn Statement to reduce the rate to 17% by 2020.