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Autumn Budget 2017 Summary

Today Chancellor Philip Hammond delivered his first Autumn Budget to Parliament.  Whilst he was happy to make light of the speech, there isn’t a whole lot of content in the budget document – particularly relating to financial services.

Hammond believes that Britain is a place of ‘boundless opportunity’ and reinforced that this was a government committed to ‘making work pay’.  With this in mind, there were increases to the minimum and living wages, and the personal allowance and higher rate tax thresholds are both to be increased in line with inflation. 

The freeze on fuel duty will continue for another year, and there will be no increase in duty on beer, wine or spirits.  From today, first time buyers are also getting a better deal on stamp duty.

However, it’s not all dad jokes and comedy throat lozenges. Both expectations on growth and productivity are down, and whilst the government is still adamant that there is no desire or intention to leave the EU without a deal, the Chancellor has allocated an extra £3bn (on top of the £700m already allocated) to ensure that there is a plan for any eventuality. 

Our summary sets out the main changes to tax rates and allowances for individuals, companies and trustees. It also aims to identify other notable changes which may be of interest to advisers.

Income Tax

  • The tax-free personal allowance will increase to £11,850 on 6 April 2018.
  • The higher rate tax threshold increases to £46,350 (the equivalent threshold in Scotland is yet to be announced) from 6 April 2018.
  • Meanwhile the band of savings income that is subject to the 0% starting rate will remain unchanged at £5,000.
  • As previously confirmed the dividend allowance will fall from £5,000 to £2,000 on 6 April 2018.
  • The government remains committed to its objective of a personal allowance of £12,500 and higher rate tax threshold of £50,000 by 2020.

Capital Gains Tax (CGT)

  • The annual exempt amount for the 2018/19 tax year will rise to £11,700.
  • While the introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.

Inheritance Tax (IHT)

  • The residence nil rate band came into effect on 6 April 2017. Initially set at £100,000, it will increase to £125,000 from 6 April 2018.
  • And to recap the standard nil rate band will remain fixed at £325,000 up to and including the 2020/21 tax year.

Corporation Tax

  • To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.
  • With effect from April 2019, withholding tax obligations will be extended to royalty payments, and payments for certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located.

Pensions

  • As expected the standard lifetime allowance will increase in line with CPI rising to £1,030,000 for 2018/19.
  • From April 2019 tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.
  • The government will also support long-term investment by giving pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio. The Pensions Regulator will clarify guidance on investments with long-term investment horizons.
  • State Pensions
    • For those who reached State Pension age before 6 April 2016 -The basic State Pension will be increased by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension amounting to £125.95. Any State Earnings Related Pension is payable in addition.  The benefits of the triple lock uprating will also be passed on to the poorest pensioners through an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension.
    • For those who have a State Pension Age on or after 6 April 2016 the full new State Pension will also be increased by the triple lock, rising by £4.80 per week to £164.35.

Not announced in the Budget but the government has confirmed that it is to bring forward the publication of draft legislation to ban pensions cold-calling, including texts and emails, to early 2018.  This is slightly earlier than originally anticipated following the DWP and HMT response published in August 2017 to a consultation on pension scams.

ISAs

  • The ISA subscription allowance will remain unchanged from 6 April 2018 at £20,000.
  • While the Junior ISA/Child Trust Fund allowance for 2018/19 sees an increase to £4,260.

EIS

  • In a bid to finance growth in innovative firms the government will double the annual allowance for people investing in knowledge-intensive companies through the Enterprise Investment Scheme (the current annual limit being £1,000,000). New tests will be introduced to ensure the additional allowance benefits the intended innovative companies.

National Insurance

  • No new announcements regarding National Insurance Contributions (NICs) although the Budget papers reiterated the government continues to work with stakeholders on the detail of reforms to simplify the NICs system.

Stamp Duty

  • From today, all first time house buyers will be exempt from stamp duty on house purchases up to £300,000.  In order to account for inflated house prices in certain areas, stamp duty will also be exempt for the first £300,000 of first time house purchases on properties valued up to £500,000.

Miscellaneous

  • The government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer, and more transparent. This seems to be an area that is revisited periodically.
  • The government remains committed to tackling tax evasion and avoidance, aggressive tax planning and non-compliance, including those seeking to evade or avoid tax using offshore structures.
  • From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.
  • The government wants to see driverless cars on UK roads by 2021 and will make changes to the regulatory framework, including how driverless cars can be tested without a human safety operator. An initiative will be launched to determine how roads should be adapted to support self-driving cars.
  • But, before this happens, an additional £45million will be invested to help reduce the number of potholes in England!  
  • As publicised, there will be £15.3 billion of new financial support for housing over the next five years to meet the government’s target of 300,000 new homes per year. Planning reforms will be introduced to ensure more land is available for housing, and better use is made of underused land.  In addition £204 million of funding will be provided for innovation and skills in the construction industry.   
  • The government intends to tackle environmental issues and will launch a call for evidence in 2018 as to how the amount of single-use plastics waste can be reduced via the tax system or charges. Operators of illegal waste sites will become liable for Landfill Tax from 1 April 2018, and there will be tough civil and criminal sanctions for those who flout the rules.  In addition, there will be £30 million extra funding over the next four years to help the Environment Agency tackle waste crime.
  • The government will provide the NHS with £335m this year, in order to help plan for the winter.  There will then be another £1.6bn allocated in 2018/19 to help meet A&E targets and reduce waiting lists across the service.  New pay awards will also be introduced as part of a new pay deal for staff members on the Agenda for Change contract.
  • Grenfell Tower – Acknowledging the tragedy, the government has promised £28m will go to victims and their families.  This includes new mental health services, new community spaces and a regeneration project.  There was also a promise that lack of funds at local authority level would never be a barrier to ensuring fire safety measures are met.

Inevitably, the impact of some of these changes will gradually become clearer and further details of changes will emerge as new information becomes available. In the meantime if you have any questions regarding any of the above, please email Technical.

This note is for use by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam Investments and Pensions accepts no liability for any action taken or not taken by any individual or firm as a result of the contents of this material. Whilst we have made every effort to ensure the accuracy of this material we cannot accept responsibility for any consequences (financial or otherwise) arising from relying on it.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.