Philip Hammond delivered the Government’s Spring Budget yesterday. Key comments were about further support for Social Care and the NHS, with very little in the way of changes to personal taxation or savings, aside from those that had already been announced. Detailed below are the key points, with many simply confirming announcements that were made in previous Budgets in 2016.
Money Purchase Annual Allowance – The Government proposed in the Autumn that the money purchase annual allowance (MPAA) be reduced from its current level of £10,000 to £4,000 from 6 April 2017. This is the amount you can save into a pension, once an individual has withdrawn taxable income and the reduction was being proposed to clamp down on those seeking double tax relief.
After a consultation over the winter, this had now been agreed and comes into effect from 6th April. There are no proposed changes to the way the MPAA currently operates, the Government simply does not believe that an MPAA of £10,000 is appropriate or needed on an ongoing basis. In their words, it has set the MPAA at a level that focuses Government support on those who genuinely need, rather than simply choose, to draw on their pension savings.
Dividend Tax – There is a reduction in the tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000. This will come into effect from Tax Year 18/19.
Lifetime ISA – Introduced in the March Budget, the Government have confirmed that the Lifetime ISA will be introduced from 6 April 2017 for savers under the age of 40. At present, there are very few providers who are willing to enter this market and so we have a watching brief on it at present.
ISA Allowance –The Budget confirmed that the ISA allowance will increase to £20,000 for the 2017/18 tax year. The ISA allowance at present is £15,240.
NS&I Investment Bond – As confirmed in the Autumn, NS&I will offer a new 3-year savings bond. The rate has been confirmed as 2.2%. The Bond will be open to those aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000. This has come in for some criticism as savings rates have improved slightly since the Autumn when the rate was announced and this is now not as competitive as it could be.
Insurance Premium Tax (IPT)
Note that IPT will increase for the third time in less than eighteen months from 10% to 12% with effect from 1 June 2017. This was confirmed in the Autumn Statement but we feel it is worth reiterating.
Tax Rates & Allowances
The changes to the tax thresholds announced in March 2016 were also confirmed:
• Personal Allowance (the amount people earn before they have to start paying Income Tax) – This will increase to £11,500 from 6 April 2017
• Personal tax – The higher rate tax threshold, above which higher rate tax applies, will rise to £45,000 from 6 April 2017
The key points outlined here may well raise questions regarding your own personal circumstances. There are of course many other changes that will affect tax-payers one way or another.
If you would like to discuss your current financial planning arrangements to make sure you are maximising the opportunities now available to you, please do not hesitate to contact us.