Autumn Statement 2016

23/11/2016

Today’s Autumn Statement didn’t produce a lot of new tax developments. In many cases, there was confirmation of changes that were announced in the 2016 Budget.

 

Personal Allowance

It was confirmed that the government will raise the personal allowance to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament. From 2017 the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.

Once the personal allowance reaches £12,500, it will then rise in line with inflation.

Non doms

They confirmed that from April 2017:

  non doms will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non doms who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust

  inheritance tax will be charged on UK residential property when it is held indirectly by a non dom individual through an offshore structure, such as a company or a trust.

It was also confirmed that there will be amendments to Business Investment Relief from April 2017 to make it easier for non doms who are taxed on the remittance basis to bring foreign funds money into the UK for the purpose of investing in UK businesses.

The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. This could mean an amendment to the 10% discount rule for non doms on foreign pensions.

 

Termination payments

As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. However it was confirmed that tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked.

Income Tax Limits

As announced in Budget 2016 they will increasing the ISA limit from £15,240 to £20,000 in April 2017.

The starting rate for savings band will remain at its current level of £5,000 for 2017/18.

The Money Purchase Annual Allowance for pensions will be reduced to £4,000 from April 2017.

Employees

Significant amendments will be made to salary sacrifice schemes from April 2017, except for arrangements relating to pensions, childcare, Cycle to Work and ultra-low emission cars. This will reduce the previous tax advantages although 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.

Corporation tax rate

It was confirmed that the corporation tax rate will be reduced to 17% by 2020.

Loss relief

As announced at Budget 2016 they are to go ahead proposals to restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017. However it will be subject to a £5 million allowance for each standalone company or group.

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