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Personal finance


AuTuMN sTATeMeNT 2016 – WHAT IT MeANs FOR YOuR PERSONAL FINANCES


hilip Hammond’s first Autumn Statement contained a number of positive announcements from a personal finance perspective, with arguably less ‘spin’ and fewer negative developments for the areas of tax and pensions legislation that affect the majority of our clients.


P


Income Tax The increase in the personal allowance in 2017/18 is


confirmed as £11,500 - up from £11,000 - and the higher rate threshold will rise to £45,000 from £43,000 currently. Increases are planned to £12,500 and £50,000 respectively by 2020. (Different bands will apply in Scotland as a result of devolved powers). Combined, these changes will make a significant difference to many lower and middle-income earners and even provide a modest improvement for higher earners. The 60% income tax bracket (caused by the progressive removal of the personal allowance on income above £100,000) widens slightly to between £100,000 and £123,000. Individuals with earnings in this bracket should consider pension contributions to avoid the 60% tax rate.


Salary Exchange Arrangements The tax and National Insurance advantages of


salary exchange schemes will be removed from April 2017, with only a few exceptions: pensions; childcare vouchers; the cycle to work scheme and ultra low emission cars. As a result of these changes, employees exchanging


salary for benefits will pay the same tax as those who pay for them out of post-tax income, although any existing arrangements in place before April 2017 are protected until April 2018. Larger arrangements for cars, accommodation and school fees are protected until April 2021.


by Ian Thomas Pilot FINANCIAL PLANNING.


Company Taxation The Government intends to cut corporation tax to 17% by 2020 and the rate will fall, as planned to 19% in April 2017. For owner-managed firms these changes will go some way to offsetting the new dividend taxation rates announced by the previous Chancellor. From 1 April 2017 there will be a new (higher) VAT flat


rate of 16.5% for ‘businesses with limited costs’, defined as companies whose costs of goods is less than 2% of turnover, or less than £1,000 per year.


fewer negative developments for the areas of tax and pensions legislation that affect the majority of our clients


Pensions No news was good news when it came to pension tax relief, which remains untouched. It appears that now is still not the time for another major pensions shake up, although we believe that this remains on the Government’s radar. In the meantime now could be a good time to maximise funding and secure higher or additional rate tax relief, if applicable. The Chancellor announced just one cut to pension allowances. The Money Purchase Annual Allowance will be cut from £10,000 to £4,000 from April 2017. This only affects individuals who have accessed pension income from a defined contribution (DC) pension under the new pension flexibilities


and then subsequently make further contributions to a DC scheme. For those already in receipt of a State Pension, it


was confirmed that the generous triple lock will be maintained throughout the current parliament.


Savings & Investments The ISA subscription limit is being increased to £20,000 with effect from 6 April 2017, a significant increase on the current £15,240 limit. Ns&I will offer a new 3 year Investment Bond with an indicative rate of 2.2% from spring 2017. At only 0.6% higher than the current best-buy 3 year bond interest rate, however, savers with the maximum £3,000 to put aside for this period would only gain £18 extra interest per year, before tax. When compared to the serious impact ultra-low interest rates are having on savers, this initiative is really no more than window dressing.


For further information on these and other policy initiatives announced in the Autumn Statement, please contact Ian Thomas: Tel. 01803 839194 ian@pilotfinancial.co.uk Pilot Financial Planning is authorised and regulated by the FCA. This document is intended to provide helpful information of a general nature and does not constitute financial advice.


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