On Wednesday 23th November 2016 the new Chancellor of the Exchequer, Philip Hammond, delivered a combined ‘Spending Review and Autumn Statement’ to the House of Commons.
Some interesting announcements were expected following the Brexit vote as he had stated previously “We are entering a new phase in the story of the British economy. It will require a different set of parameters“.
In fact this was his first and last Autumn Statement in its current form as the next Spring Budget will be the last with the main Budget statement moving to the autumn from 2017. This is a welcome change as it will allow taxpayers and their advisors to plan well in advance for any changes proposed for the following tax year.
Below is our summary of the key proposals contained in the Chancellor’s Autumn Statement:
Income Tax
- As previously announced, the personal tax free allowance is to be increased by £500 to £11,500 for 2017/18 with the higher rate income tax threshold increased to £45,000.
- The Government is committed to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this current Parliament.
- From 2020/21 the personal allowance will increase in line with inflation.
National Insurance Contributions
- From April 2017 the Class 1 NIC earnings threshold for both employers and employees is to be aligned at £157 per week.
- It was confirmed that Class 2 NICs payable by the self-employed will be abolished from April 2018.
- From April 2018, termination payments over £30,000 will be subject to employer Class 1 NIC
Employee Benefits
- From April 2017, the tax advantages of most salary sacrifice schemes will be removed. This proposed change will increase the tax liabilities of both employers and employees who currently benefit from such schemes where salary is swapped for employer benefits.
- Pensions, childcare, Cycle-to-Work and ultra-low emission cars will be exempt from the changes
National Minimum Wage
- The National Living Wage for those aged 25 and over will increase to £7.50 per hour from April 2017. This will provide additional wages of over £500 per year for a full-time employee.
Business Tax & Funding
- The corporation tax rate is due to fall to 17% by April 2020 from the current 20%, as previously announced. The reduced rate will be the lowest in the G20 group of countries and will benefit over 1 million companies.
- £400 million is to be made available from the British Business Bank to unlock £1 billion of new investment in innovative firms planning to scale up.
- New rules are to be introduced that will limit the tax deductions that large groups can claim for their UK interest expenses from April 2017.
- There are concerns over the growing fiscal cost to the Exchequer of the volume of incorporations, particularly of single-director companies. The Government is to consult on proposed changes to ensure that the taxation of different ways of working is fair between different individuals.
Value Added Tax
- From 1 April 2017 a new 16.5% rate is to be introduced into the VAT Flat Rate Scheme which will apply to businesses with limited costs such as labour-only businesses.
Personal Investments and Pensions
- A new three-year Investment Bond will be available from April 2017 which will provide an indicative rate of 2.2% pa. The bond will allow savers to invest up to a maximum of £3,000.
- The ‘Money Purchase Annual Allowance’ is to be reduced from £10,000 to £4,000 from April 2017. This significant change is being made as the government does not consider that earners aged 55 and over should be able to enjoy double pension tax relief, such as relief on recycled pension saving.
Other tax changes
- The next fuel duty rise scheduled for April 2017 is cancelled, for the seventh year in succession. This will save the average driver around £130 a year.
- Insurance Premium Tax is to be increased from 10% to 12% from June 2017.
Government Spending
- A new National Productivity Fund to provide £23 billion is to be spent on innovation and infrastructure over five years.
- A £2.3 billion housing infrastructure fund is to be available to help provide 100,000 new homes in high-demand areas. In addition £1.4bn is to be made available to provide 40,000 new affordable homes.
- An additional £2 billion per year is to be made available for businesses and universities for research and development projects.
- There are no plans for any further welfare savings within this current Parliament.
- Triggered by the ‘Barnett’ formula an additional £400 million will be devolved to the Welsh Government to be spent on infrastructure projects.
Further Advice and Support
If you would like to discuss the content of this newsletter/article and how any proposed changes relate to your individual or business circumstances then please do not hesitate to email us at contact@marshvision.com or ring us on 01633 215 544
A range of other tax articles are available to view on the Marsh Vision website at the following link:
http://www.marshvision.com/Tax-Accountants-Laws-and-updates.asp
