Autumn Statement 2016
The Chancellor’s first – and last – Autumn Statement pointed to lower growth forecasts and rising debt, while avoiding radical proposals.
Our electronic Autumn Statement Report, provides further analysis on the changes, key facts and figures, and useful financial planning tips. (Please note that, if viewing the report on a desktop computer, you will need to have Adobe Flash Player installed.)
The Chancellor has delivered his Autumn Statement. While much of the Autumn Statement confirmed measures previously publicised, there were some new announcements. Key themes following the Brexit vote were around investment in infrastructure and positive, albeit reduced, growth forecasts.
There were no significant changes made to UK pensions legislation. Tax relief continues to be available at the individual’s marginal rate and employer contributions continue to be exempt from National Insurance.
The government will more closely align the tax treatment of ‘foreign pensions’ with UK pensions. This will probably mean that 100% of a ‘foreign pension’ payable to a UK resident will be liable to UK tax (as opposed to 90% at present).
For those who have emigrated from the UK with tax-relieved pension funds: the time an individual needs to have been non-resident to take benefits, in excess of those permitted under HMRC’s QROPS rules, has been extended from five complete tax years of non-residence to ten complete tax years.
Income Tax Personal Allowances
The Income Tax Personal Allowance will increase to £11,500 from 6 April 2017. The higher rate tax threshold will rise to £45,000 from 6 April 2017, as previously confirmed in the Budget of March 2016. The Chancellor has re-affirmed the government’s commitment to raising the Income Tax Personal Allowance to £12,500, and the higher rate tax threshold to £50,000, by the end of this Parliament.
As announced in the Budget, the government will create two new Income Tax allowances of £1,000 each, for trading and property income. Individuals with trading or property income below the level of the allowance will no longer need to declare or pay tax on that income.
The government confirmed that the 0% starting rate for savings income will remain at £5,000 for 2017/18.
Chargeable events gains
As announced in the Budget and following consultation, the government will legislate to avoid the disproportionate tax charges that arise in certain circumstances from life insurance part-surrenders and part-assignments. The legislation will allow applications to be made to HMRC to have the charge recalculated on a just and reasonable basis to allow fairer outcomes for policyholders. The change will take effect from 6 April 2017.
The government will also legislate to give them the power to amend the list of assets that Personal Portfolio Bond policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent of the Finance Bill 2017
The government has re-affirmed the previously announced reforms to the taxation of non-domiciled individuals.
From 6 April 2017, non-domiciled individuals will be deemed UK-domiciled for all tax purposes if they have been UK tax resident for 15 of the past 20 tax years.
- Inheritance Tax will be charged on UK residential property when held by a non-domiciled individual through an offshore structure such as a company or a trust.
The government also committed to amending the rules for Business Investment Relief (BIR) to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK to invest in UK businesses.
It will be important to see the detail of these changes in the Finance Bill before determining their impact and what planning may be possible.
As signalled in the Budget, the government will also consider the introduction of penalties for any person who has enabled another person or business to use a tax-avoidance arrangement that is later defeated by HMRC. Draft legislation to this effect will follow shortly. Importantly, these provisions will not apply to “tried and tested” arrangements permitted by the legislation such as pensions, ISAs, VCTs, EISs etc.; as, to take effect, the arrangement has to be first “challenged” by HMRC.
The government will also introduce a new legal requirement to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.
However, it is important to remember that, just because something is ‘offshore’ (e.g. an offshore fund or an offshore bond), this does not necessarily mean that it will be subject to attack.
Investors with offshore reporting funds will no longer be able to deduct performance fees from the funds’ reportable income for tax purposes. From April 2017, fees will instead reduce any tax payable on disposal gains.
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs), and Seed Enterprise Investment Schemes (SEISs)
The government announced a small number of technical changes to clarify the rules regarding conversion rights for shares and follow-on investments in VCTs. A consultation was also announced into options to streamline and prioritise the advance assurance service.
Overall, nothing in the Autumn Statement reduces the need for you to consider how to structure your assets in a tax-efficient manner.
Should you wish to discuss any of the detail contained in the note, please do not hesitate to get in touch.
The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.