This week saw the new Chancellor Phillip Hammond give his first and last Autumn statement, as he announced that he is bringing in a Spring statement and an Autumn budget, but that wasn’t all that he had to say.
He increased the income tax personal allowance to £11,500 from the 2017-18 tax year, and the higher rate threshold to £50,000 by the end of this Parliament.
From April next year, some salary sacrifice schemes will be abolished. Only those relating to pension, child care, cycling to work and ultra-low emission cars will stay.
The state pension triple lock, which means that it rises every year by the highest price of inflation, earnings growth or 2.5%, will stay, but only until 2020 – leading many economic experts to question the Chancellor whether the triple-lock will disappear come 2020.
On personal pensions, the Chancellor announced that from April, those over 55s who start accessing their pension pots will now only be allowed to drawdown £4,000 a year and still automatically qualify for tax relief, down from £10,000.
He introduced a market-beating NS&I Savings Bond paying gross interest of 2.2% over 3 years, for amounts up to £3,000 from spring 2017.
When it came to inheritance tax, he announced that from April 2017 inheritance tax will be charged on UK residential property when it is held indirectly by a non-UK resident through an offshore company or trust.
Insurance Premium Tax (IPT) rose again, from 10% to 12% from June next year. IPT has already seen a hike in recent years, going from 6% to 9.5% last year, then a further small rise earlier this year. Travel insurance is exempt from the rise as it is taxed in a different way.
Fuel duty rate was frozen for the seventh successive year and the National Living Wage is set to increase from £7.20 per hour to £7.50 per hour from April 2017.
Seer Green Financial Planning’s Director, Siobhan Thomas, said of the Chancellor’s first statement: “The longer-term growth forecasts were little changed and the shorter-term ones were actually a bit better than we might have expected. However, the extent of the borrowing forecasts were gloomy, with the Office for Budget Responsibility forecasting some difficult times ahead post Brexit and slashing predicted growth rates, but all in all the autumn statement was ok.
“Changes to the living wage and the freezing of fuel duty will be welcomed by many, as well as changes to tax allowance thresholds. While increases in IPT and the changes to pension drawdown tax relief won’t be as popular with some.
“The introduction of a market-leading savings bond is great news for savers who have suffered in recent years because of the record low interest rates.”
Siobhan added: “On a professional note, the introduction of a spring statement and autumn budget is great news for us in the financial services as it gives us more time to implement the changes needed before usual April deadlines.”