Autumn Statement 2016: Key announcements for individuals
The Autumn Statement was delivered by Philip Hammond on Wednesday 23 November at 12.30pm. It was the first major economic statement since the Brexit vote. The Chancellor mainly confirmed the changes that have already been announced, but gave more insight on when and how they will be implemented.
In terms of tax avoidance, the government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. The government will also remove the defence of taking reasonable care by relying on non-independent legal advice when considering penalties for any person or business that uses such arrangements.
Philip Hammond also announced a shake-up to the Autumn Statement and the Budget in the spring. It will now be replaced by a single Annual Budget in the autumn, meaning there will be less frequent tax changes and greater certainty for the country. The tax changes announced in the statement, both personal and for businesses, are summarised below.
1 Personal Allowance
The personal allowance is currently £11,000 this tax year, and will increase to £11,500 in April 2017. It will reach £12,500 by 2020/21. It will then rise in line with Consumer Price Index (CPI), rather than the National Minimum Wage.
The point at which you pay the higher rate of income tax will increase from £43,000 this year to £45,000 in 2017/18. It will reach £50,000 by 2020/21.
2 Inheritance Tax relief for donations to political parties
Inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This will come into effect when the Finance Bill is approved in 2017/18.
3 Non-domiciled individuals
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. This closes a loophole that has been used by non-domiciled individuals to avoid paying inheritance tax on their UK residential property.
The government will change the rules for the Business Investment Relief (BIR) scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses.
4 Life insurance policies
From 6 April 2017, the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders or part-assignments will be alleviated. This will be achieved by an application to HMRC to have the charge recalculated on a just and reasonable basis.
5 Junior ISAs and Child Trust Funds
From 6 April 2017, the annual subscription limit will be uprated to £4,128, alongside the ISA subscription limit increase from £15,240 to £20,000.
6 Pension scams
The government will publish a consultation on options to tackle pension scams, including banning cold calling, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse small self-administered schemes.
7 Tax Enquiries: Closure Rules
The government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high risk and complex tax enquiries.
8 NS&I savings bond
NS&I will offer a new market leading 3-year savings bond available for 12 months from spring 2017.
9 Increased living wage
The living wage has increased to £7.50 per hour from April 2017.
The national minimum wage has also increased:
• 21-24 year olds – from £6.95 per hour to £7.05
• 18-20 year olds – from £5.55 per hour to £5.60
• 16-17 year olds – from £4.00 per hour to £4.05
• Apprentices – from £3.40 per hour to £3.50
By April 2017, both employees and employers will start paying National Insurance Contribution (NICs) on weekly earnings at £157 per week.
10 Employee perks
Previously, employees could exchange some of their salary for a non-cash benefit in kind, which was taxed less or not taxed at all. However, now they will be subject to the same tax as cash income. Pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt. All of those arrangements in place before April 2017 will be protected for a year.
Income tax reliefs are removed on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement. It also removes the CGT exemption relating to shares received as consideration.
11 Corporation Tax rates and reliefs
This will reduce to 17% by 2020.
The government will expand the circumstances in which companies can get corporation tax deductions for contributions to grassroots sports clubs from April 2017.
Rural rate relief will be increased to 100% from 1 April 2017, to remove the inconsistency between rural rate relief and small business rate relief. This means small businesses in rural areas could achieve a tax break of up to £2,900.
12 Insurance Premium Tax
Insurance Premium Tax will increase from 10% to 12%. It is up to insurers whether and how they pass on this cost to consumers.
13 Annual Tax on Enveloped Dwellings (ATED)
ATED is a tax paid by companies that own UK residential property valued at more than £500,000. It is set to rise in line with inflation for 2017/18.
14 Bringing non-resident companies UK income into the corporation tax regime
The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.
For an overall summary, click here.