A summary of the Autumn Statement 2016
The Autumn Statement was delivered on Wednesday 23 November by Philip Hammond. It was the first major economic statement since the Brexit vote, and detailed the major changes our economy needs to make to prepare us for independence from the European Union. There were no major surprises, but the Chancellor did promise large investments in transport, technology and housing to increase our productivity to help us remain competitive in the global economy. The key announcements are summarised by sector below.
1 Ban on upfront letting fees
Letting agents will no longer be able to charge upfront rental fees. There are concerns that this may result in an increase in rent overall, as landlords try to claw back some of their losses.
2 Housing Building
The Chancellor pledged a £2.3 billion housing infrastructure fund to create 100,000 new homes in areas of high demand.
The government will relax restrictions on grant funding to allow providers to deliver a mix of homes for affordable rent and low cost ownership.
He also pledged an extra £1.4 billion to build 40,000 new affordable homes.
3 Right to buy
The government will fund a large-scale regional pilot of the right to buy for housing association tenants. Over 3,000 tenants will be able to buy their own home with Right to buy discounts under the pilot.
4 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.
5 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.
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 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.
8 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.
9 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.
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.
10 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.
11 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.
12 NS&I savings bond
NS&I will offer a new market leading 3-year savings bond available for 12 months from spring 2017.
The Chancellor announced investments plans for the transport sector with the aim of improving productivity, as workers and businesses will not be hampered by poor transport links.
13 Roads and local transport
There will be a £1.1billion investment in English local transport networks, and a further £220m investment for traffic pinch points.
14 Future transport
The Chancellor also pledged £450m towards digital signalling for railways, and £390m for low-emission vehicles.
15 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.
16 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.
17 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. In the Spring 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.
18 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.
19 Employee perks
Previously, employees could exchange some of their salary for a non-cash benefit in kind, which were 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.
20 Termination payments
From April 2018, termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked. The first £30,000 of a termination payment will remain exempt from NICs and income tax.
21 Legal support
From April 2017, all employees called to give evidence in court will no longer need to pay tax on legal support from their employer.
22 Benefits in Kind
The government will publish a consultation on how benefits in kind are valued for tax purposes, including employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017.
23 Disguised remuneration schemes
The government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer’s contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period
24 Removal of tax advantages awarded under employee shareholder status
The Chancellor has pledged to scrap tax relief on employee shareholder status, whereby employees could own shares in their employer. This is due to evidence suggesting they were mainly used for tax planning. Capital gains tax, income tax and NICs exemptions will be closed down. This comes into effect on 1 December 2016, and because employees need to have a 7 clear day cooling off period after receiving independent advice, this means there is not enough time to get them in place before the cut-off.
25 Strengthening tax avoidance sanctions and deterrents
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 having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements