The last autumn statement has been given by Phillip Hammond, the new man in No11. Probably one of the main announcements was in fact the change in the purpose of the autumn statement and the spring budget. The next Autumn statement will be a budget and subsequent spring budgets will become statements about ‘economic progress’. Lots of other measures were re-announced in this statement and some of the key parts of the statement are summarised below:
Personal Tax Thresholds
The statement confirmed that the personal allowance will rise to £11,500 in April, coupled with the 20% income tax band being increased from £32,000 to £33,500 meaning higher rate income tax will start at a threshold of £45,000. There was a commitment to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 during the lifetime of the parliament.
National Insurance Contributions
The lower earnings limit for employee and employer contributions are to be aligned at a level of £157per week/£8,164 per annum. This has implications for pension contributions where these are based on statutory limits, as to date the band earnings for contributions have been set by the national insurance band earnings. At the moment it is uncertain what detail will be announced in respect of this link.
A new dividend allowance is introduced in April allowing the first £5,000 of dividend free of tax. Dividends above the allowance will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. The introduction of the allowance coupled with an increase in the tax rate means that small business owners should review their remuneration strategy.
Pension Tax Relief
Although there was much speculation about levels of relief and links to age, little was changed. The Money Purchase Annual Allowance (MPAA), which is triggered once you have accessed taxable benefits from a personal pension plan was reduced to £4,000 from £10,000, but nothing else was changed. We expect more changes in future budgets. The change will be effective from 6 April 2017.
The ISA Allowance
Some might believe the ISA rules are getting as complex as the pensions rules. From April the overall contribution limit is being increased to £20,000 across the various different types of ISA. The new Lifetime ISA will be introduced that allows those under 40 to contribute up to £4,000 and receive 20% additional contribution relief, meaning the maximum available relief will be £1,000 each year. The Lifetime ISA can be encashed to purchase a first time buyer main residence and the relief will be retained, alternatively it can be surrendered at, or after, age 60 without penalty or loss of the relief. Those who don’t qualify for the Lifetime scheme or wish to retain early access can continue to contribute to ISA as before.
Northern Ireland Corporation Tax
The main UK corporation tax rate will be dropped to 19% in April 2017 with further decreases to 17% by April 2020 being suggested. More importantly the Finance Bill 2017 will devolve powers to set Corporation Tax to the executive and subject to the ‘folks on the hill’ being able to demonstrate good financial housekeeping, we may see Corporation Tax rates of 12.5% introduced here in Northern Ireland for April 2018. Watch this space!
Insurance Premium Tax (I.P.T.)
This is to rise from 10% to 12% in June 2017. A small increase in a small tax, but one which we all pay on numerous occasions throughout the year on both personal and business insurance premiums. Not one that affects our wealth management clients, but unfortunately it will potentially affect all our commercial clients.
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