Autumn Statement 2016: 10 Things you need to know
The final Autumn Statement has been delivered.
But don’t worry, after the next Budget in spring 2017, we’ll be switching to a 2017 Autumn Budget followed by a 2018 Spring Statement with the pattern then repeating each subsequent autumn and spring. Confused yet?!
Some of the key changes are as follows:
- a personal allowance of £12,500 and higher rate threshold of £50,000 by 2020;
- the intention to align employer and employee NIC thresholds from April 2017;
- a review of non-cash payments by employers to their employees; and
- the introduction of 100 per cent first year allowances for electric car charge-points.
1. Personal Tax
- The income tax personal allowance will be raised to £12,500 and the higher rate threshold to £50,000, by the end of 2020.
- In 2017 the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.
Once the personal allowance reaches £12,500 in 2020 it will then rise in line with the Consumer Prices Index as the higher rate threshold does, rather than in line with the National Minimum Wage. This will lock in the increases the Government has made to the personal allowance over the past six years, so they are not eroded by inflation, while increasing the sustainability of the public finances in the long term.
2. Pensions & Savings
- Pension scams. A consultation will soon be published on options to tackle pension scams, including banning cold calling, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse rules that apply to small self-administered schemes (SSASs).
- Money Purchase Annual Allowance (MPAA) – the plan is to reduce this to £4000 from April 2017. Once a person has accessed their pension savings flexibly, if they wish to make any further contributions to a defined contribution (DC) pension, tax-relieved contributions are restricted to a special MPAA. A consultation has been published alongside the Autumn Statement seeking views on the proposal to reduce it to £4000. (Note that just taking a tax free cash sum doesn’t trigger the MPAA.)
- NS&I Investment Bond – A new 3 year savings bond is to be launched to help savers who have struggled with low interest rates. The indicative rate is 2.2% but this is subject to change. Savers aged 16+ will be able to invest between £100 and £3,000 and the bond will be available for 12 months from Spring 2017.
3. Remuneration Taxation
Employers can choose to remunerate their employees in a range of different ways in addition to a cash salary. The tax system treats these different forms of remuneration inconsistently and sometimes more generously.
The Government has announced it will consider how the system could be made fairer between workers carrying out the same work under different arrangements, and will look specifically at how the taxation of benefits in kind and expenses could be made fairer and more coherent.
The Government will take the following action:
• Salary sacrifice – following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultralow emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
• Valuation of benefits in kind – the Government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017.
• Employee business expenses – the Government will publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.
It is good news that the Government has decided to omit ultra-low emission cars from the proposed salary sacrifice changes as this would have undermined the effectiveness of the company car regime as an incentive to choosing low-emission cars.
4. National Insurance contributions
From April 2017, the National Insurance secondary threshold (employer threshold) and the National Insurance primary threshold (employee threshold) are to be aligned. This measure means that from April 2017 both employees and employers will start paying National Insurance on weekly earnings above £157.
5. Corporation tax rates
Corporation Tax Rates will be as follows:
• Financial year 2017 – 19%
• Financial year 2018 – 19%
• Financial year 2019 – 19%
• Financial year 2020 – 17%
Other Corporation Tax changes include:
- expanding corporation tax relief for contributions to grassroots sports with effect from 1 April 2017;
- clarification and improvement of certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes.
Corporation tax losses
Rules to impose a 50% restriction on the amount of profit that can be offset with carried forward corporation tax losses will take effect from 1 April 2017, subject to a £5 million allowance for each standalone company or group. The rules will also allow a greater degree of flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction of the amount of profit that banks can offset with carried forward losses incurred prior to April 2015 remains at 25%.
6. Income tax allowance
As announced at Budget 2016, the government will create two new income tax allowances of £1,000 each, for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income. The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.
7. Property Income
Letting agent’s fees
Whilst not strictly tax-related, the Government announced that letting agents will no longer be able to charge renters fees, for example when they sign a new tenancy agreement. This will be subject to consultation in due course, though the Chancellor in his speech indicated he wished to see the reform made “as soon as possible”.
In his Autumn Statement speech, the Chancellor said that, as part of “sticking to the Business Tax Roadmap” set out at March 2016, the Government would “implement the business rates reduction package worth £6.7 billion”; further, that the Communities Secretary “will lower the transitional relief cap from 45% next year to 43%, and from 50% to 32% the year after”.
Full-fibre infrastructure relief
A new 100% business rates relief for new Full-fibre infrastructure, for a five year period, will be provided from April 2017. This is part of a package which involves £1bn government investment to support the private sector to roll out more Full-fibre broadband by 2020-21, and to support trials of 5G mobile communications.
Rural rate relief
The Government says that to remove the inconsistency between rural rate relief and small business rate relief it will double rural rate relief, from 50% to 100%, from 1 April 2017, saving a business up to £2,900 a year. This relief is available to businesses in rural areas with a population under 3,000, where that business is:
• the only village shop or post office with a rateable value of up to £8,500; or
• the only public house or petrol station with a rateable value up to £12,500.
8. VAT and indirect taxes
Insurance premium tax
The standard rate of insurance premium tax (IPT) is due to rise to 12% from 10% with effect from 1 June 2017.
A new 16.5% rate applies to the flat-rate scheme (FRS) from 1 April 2017 for businesses with limited costs, such as many labour-only businesses.
The term “limited cost trader” is defined as a trader whose VAT inclusive expenditure on goods is either:
• less than 2% of their VAT inclusive turnover in a prescribed accounting period; or
• greater than 2% of their VAT inclusive turnover but less than £1,000 per annum.
The Government will introduce an online tool that will help businesses determine whether they should use the new rate. More information can be found at: VAT Flat rate Scheme
9. Company car tax
For company car tax in 2020-21:
• there will be new and lower bands for the lowest emitting cars; and
• the appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point.
10. Making Tax Digital
The Government has advised that in January 2017 it will publish its responses to the Making Tax Digital (MTD) consultations.
The MTD consultations set out the Government’s proposals for transforming the tax system to make it one of the most digitally advanced tax administrations in the world by 2020. The changes are set to be rolled out from April 2018 and among the issues addressed in the consultations were mandatory digital record keeping and the provision of quarterly updates by businesses, self-employed people and landlords.
For further information on these changes and other taxation queries please contact our tax specialists. Email: firstname.lastname@example.org, email@example.com, or firstname.lastname@example.org or call 01904 655202.