Wednesday’s budget contained a few measures that may impact your financial planning, so I have summarised them below. As always, please get in touch if you would like to chat about your specific circumstances over a coffee.
Personal Allowance and Higher Rate Threshold
The Personal Allowance will rise from £11,000 to £11,500 in 2017/18. At the same time, higher rate tax becomes payable from £45,000. When the Personal Allowance reaches £12,500 (which is planned for 2020), it will then increase with inflation year on year.
This allowance reduces from £5,000 to £2,000 from April 2018. This will reduce the tax difference between the self-employed and those taking income from a company.
Corporation Tax will be set at 19% for 2017, 2018 and 2019 reducing to 17% for the year starting April 2020.
The money purchase annual allowance falls to £4,000 from April 2017. This measure restricts the amount of tax relief available on contributions if you have already accessed your pension under flexible benefits. The purpose of this change is to stop the recycling of funds out of a pension then back into a pension.
ISA, JISA and LISA!
The contribution level for Junior Individual Savings Accounts (JISAs) and Child Trust Fund (CTFs) will rise to £4,128. Perhaps of greater use, the ISA limit increases from £15,240 to £20,000 from 6th April 2017.
The Lifetime ISA (LISA) will be available from 6th April this year. The LISA will allow adults aged between 18 and 40 to save up to £4,000 and receive a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn tax-free to put towards either a first home, or saved until the investor reaches 60 years of age. Is this the beginning of the end for pensions for those under 40? Check out this government article for further details: https://www.gov.uk/government/news/lifetime-isas-available-from-6-april-2017
New National Savings bond
A new bond will be available through NS&I from April 2017 for twelve months. The bond will pay interest of 2.2% gross. Over 16s will be able to deposit up to £3,000, with a minimum investment of £100. Interest on the bond will be paid gross. It will count towards the personal savings allowance, which allows basic-rate taxpayers to earn £1,000 in interest tax-free. Savings rates are gradually sneaking up but this remains currently very competitive.
Life insurance policies – part surrenders and part assignments
At last the Finance Bill 2017 will change the current tax rules for part surrenders and part assignments of life insurance policies to allow policyholders who have generated a wholly disproportionate gain to apply to HMRC to have the gain recalculated on a just and reasonable basis. Common sense prevails!
Beware: helping someone else to use a tax avoidance scheme now comes with a fine!
A new penalty is being introduced for those helping anyone else to use a tax avoidance scheme. People avoiding tax face significant penalties when HMRC overturns an avoidance scheme, the new penalty will ensure that those who assist them will also face the consequences!
Insurance Premium Tax (IPT)
IPT will increase from 10% to 12% in June 2017. Maybe the fall in Sterling makes holidays and new cars too expensive anyway?