Autumn Statement 2016: Tax updates and technical changes
Data Source: Compliance First, 24/11/2016
The 2016 Autumn Statement presented lots of news on taxation and pensions, as well as an overview of the country’s debt and investment plans for the next few years. For a full technical review, please see below
- Confirmation that the 2017/18 income tax personal allowance will rise to £11,500 and the higher rate threshold to £45,000.
- The personal allowance is to rise to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament.
- Once the personal allowance reaches £12,500, it will then rise in line with CPI.
- National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, so that both employees and employers will start paying National Insurance on weekly earnings above £157.
- Class 2 NICs will be abolished from April 2018.
- From April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs.
The government will introduce a new legal requirement to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.
From April 2017, facility to reduce the taxable effect of benefits –in-kind.
- From April 2017 personal use of business assets assessed on the period of usage.
- Salary sacrifice – 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), childcare, Cycle to Work and ultra-low emission cars. 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.
- The tax advantages linked to shares awarded under Employee Shareholder Status (ESS) will be abolished for arrangements entered into on, or after, 1 December 2016
- Company Car Tax bands and rates for 2020-21 – to provide stronger incentives for the purchase of ULEVs, new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point.
- Simplification of Pay as You Earn Settlement Agreements (PSAs) from 2018/19.
- New calculation of chargeable gains on life assurance investment bonds to be introduced from April 2017.
- Amendment to the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules under personal portfolio bonds. The changes will take effect on Royal Assent of Finance Bill 2017.
- From April 2017 Junior ISA limit £4,128 and Isa limit £20,000.
- New NS&I Savings Bond to be introduced paying gross interest of 2.2%, over 3 years, for amounts up to £3,000 from Spring 2017.
- Amendment to the requirements for the tax-advantaged venture capital schemes – the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs).
- Strengthen sanctions and deterrents and will take further action on disguised remuneration tax avoidance schemes.
- To ensure multinational companies pay their fair share, introduction of reforms to restrict the amount of profit that can be offset by historical losses or high interest charges
- Employee business expenses – the government will publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer
- From April 2017, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin.
- From April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust.
- From April 2017, the taper rate that applies in Universal Credit will be reduced from 65% to 63%
- Money Purchase Annual Allowance of £10,000 currently applies to limit the contributions to money purchase pension schemes once an individual has ‘flexibly accessed’ their pension benefits. A consultation has today been published as the Government proposes to decrease the level of MPAA to £4,000 from April 2017. This will help prevent the recycling of pension benefits but will still allow those who remain in work to continue with their Auto Enrolment scheme membership.
- Impending removal of tax and NI advantages from Salary Sacrifice arrangements from April 2017 will not affect pension schemes as they are excluded.
- A consultation will shortly be published on options to tackle pension scams. This will include a ban on cold calling, giving firms greater power to block suspicious transfers and making it harder for scammers to abuse Small Self Administered Schemes (SSAS).
- The tax treatment of foreign pensions will be more closely aligned with the UK’s tax regime by bringing foreign pensions and lump sums fully into tax for UK residents. Specialist schemes known as Section 615 schemes used by those employed abroad will be closed to new saving. The 5 year period during which foreign lump payments from pension benefits which have received UK tax relief can be subject to tax will be extended to 10 years for recently emigrated non UK residents. An update will be made to the criteria required to qualify as overseas schemes for tax purposes and a change will be made to align the tax treatment of transfers between pensions.
- Following the Spring Budget 2017, there will only be one budget announcement each year in the Autumn. The OBR will still produce a Spring forecast however and the Government will make a Spring Statement responding to this forecast.
- Insurance Premium Tax (IPT) will increase from the current 10% to 12% from 1st June 2017. As this is a tax on insurers it will be down to each insurers own commercial decisions as to how this will affect premiums.
- The government will ban letting agents’ fees to tenants, to improve competition in the private rental market and give renters greater clarity and control over what they will pay.
- The Ministry of Justice is consulting on proposals which will reduce the unacceptably high number of whiplash claims and allow insurers to cut premiums.
- The fuel duty rate will remain frozen for the seventh successive year.
- National Living Wage to increase from £7.20 per hour to £7.50 per hour from April 2017.