The Finance Bill - May 2017
After the Budget in March, the proposals were put into legislation through the recent Finance Bill. Following the announcement of the General Election, some of the proposals made in the Budget were not included in the Finance Bill and have therefore not been finalised.
The proposals which are now on hold
· Pension Advice Allowance – If you are in a workplace defined contribution pension scheme, you could use up to £1,500 of your fund towards paying for pensions and retirement advice. The allowance could be used over three separate tax years up to £500 on each occasion.
· Money Purchase Annual Allowance may be reduced from £10,000 to £4,000, if taxable income from either Flexi-access drawdown or an Uncrystallised Funds Pension Lump Sum (UFPLS) has been taken.
Some proposed changes were due to come into effect from April 2018:
· Self-employed National Insurance – Class 4 National Insurance Contributions will increase from 9% to 10% from April 2018 and then to 11% in April 2019.
After widespread outcry that the increases were contrary to the Conservatives 2015 election manifesto, Phillip Hammond, the Chancellor of the Exchequer, issued a letter to confirm that there would be no increase to Class4 NICs in this Parliament.
· Dividend Allowance – The £5,000 allowance will be reduced to £2,000 in April 2018, impacting any equity based investments held outside of ISAs and shareholding company directors receiving dividends as part of a remuneration strategy.
The expectation is that these items will be reviewed again after the election – either with a further Finance Bill or in the Autumn Statement which usually takes place in November.
The changes introduced from 6th April 2017
· Higher tax free allowances – An increase in the Personal Allowance from £11,000 to £11,500, and the higher rate tax threshold increased from £43,000 to £45,000 with a continued commitment to increase in future. This is a positive change for all taxpayers and provides additional scope for reviewing income levels.
· Higher ISA limits - The ISA limit increases to £20,000 and the Lifetime ISA launched in April (maximum investment of £4,000 each year), presenting more tax efficient saving opportunities.
· NS&I 3 year Investment Bond - Paying 2.2% with a maximum investment of £3,000 per issue, per person, reiterating the Government’s desire to see more saving. However with rising inflation, cash savings may struggle to retain their value in real terms.
· Overseas transfers – Qualifying Recognised Overseas Pension Schemes (QROPS). A 25% overseas transfer charge will apply on transfers from UK pensions to qualifying overseas schemes requested on or after 9 March 2017, provided you remain domiciled and resident in the UK. In certain circumstances transfers will receive an exemption from this tax charge, such as the use of an employer’s own scheme or if you are emigrating overseas.
Previously announced changes also launched in April 2017 –
· Phased removal of higher rate tax relief for buy-to-let investments;
· New Inheritance Tax exemption, the Main Residence Nil Rate Band introduced at £100,000 for 2017/18.
If you feel that these changes may affect your existing financial plans, you can call us on 0344 209 3925 to discuss how these announcements may impact your progress towards your financial goals.
Our lines are open 8.30am to 5.30pm, Monday to Friday. Calls are charge at your phone company’s basic rate. All calls are recorded for business purposes.
This article is for information only, based on our understanding of legislation and HM Revenue & Customs practice as at May 2017 and is not to be taken as Financial Advice. Origen are not tax specialists and should you have any concerns with regards to your personal tax situation, we would recommend seeking advice of an accountant. CA1273 Exp 05/18
[ Date Posted: 16/05/2017 11:46:04 ]