Autumn Statement 2016 – What You Need to Know

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Autumn Statement 2016

MoneyPlus Features Team

23rd November 2016 at 5:09pm

There were few surprises or major announcements from Chancellor Philip Hammond in what turned out to be a low-key Autumn Statement.

Goodbye Autumn Statement, hello Autumn Budget

This Autumn Statement is the last one. Major fiscal plans will be outlined in a new Autumn Budget from now on.

Here’s what he had to say in his final Autumn Statement.

Pensions: Money Purchase Annual Allowance cut to £4,000

The Government is consulting on whether the Money Purchase Annual Allowance should be cut from £10,000 to £4,000 from April 2017 for some savers.

The Government is consulting on whether the Money Purchase Annual Allowance should be cut from £10,000 to £4,000 from April 2017 for some savers.

To explain, currently the most you can pay into a DC pension and get tax relief is limited to a maximum of £40,000 or your total earnings, if less, in that year. This is still the case.

However, if you have accessed your pension beyond just taking your tax-free cash, then you are currently limited to an annual contribution of £10,000 unless you’re still in capped drawdown.

From April 2017 this is being reduced to £4,000.

State Pension triple lock to continue

On the State Pension front, the so-called ‘triple lock’ – which guarantees to increase the State Pension each year by the higher of wages, inflation or 2.5% – will be reviewed after the end of the current Parliament, which is 2020.

After then, it may increase automatically in line with inflation, although the Chancellor could choose to increase it on top of that if they wished. We wait to find out more.

Pensions and childcare exempt from salary sacrifice cuts

There were changes to salary sacrifice with some benefits being withdrawn. The good news is that the changes don’t apply to pensions, ultra-low emission vehicles, cycle to work schemes and childcare.

Keeping pensions within salary sacrifice is a welcome sign that the Government is supporting pension saving, in particular through workplace auto-enrolment.

Keeping pensions within salary sacrifice is a welcome sign that the Government is supporting pension saving, in particular through workplace auto-enrolment.

Cracking down on pension cold calling scams

Widely covered by the media last week, there will be a consultation on how to ban cold callers who try to encourage or trick people out of their pension savings.

The Treasury has stated the ban would “help bring an end to the misery brought about by the 250 million scam calls that happen in the UK every year”.

Minimum Living Wage increase to £7.50 to help the lowest paid

The minimum National Living Wage is going up by 30p to £7.50 an hour which will benefit some full-time workers by around £500 a year, according to the Treasury.

New NS&I savings launched

A new, 3-year Savings Bond will be launched through NS&I, offering 2.2% interest rates. It’s expected that at least 2 million people will benefit.

Insurance Premium Tax is going up

Not such great news for motorists, the Insurance Premium Tax is going up from 10% to 12%. However, the Government has said this will be more than offset by anti-fraud measures to cut down on false claims which will cut premiums. Fuel duty is also being frozen, for the seventh year in a row.

 

What you wanted the Chancellor to focus on

We had a fantastic response to last week’s poll on what you wanted the Chancellor to focus on

Here’s what you had to say:  What you want from the Autumn Statement

Looking ahead to 2017: What we know

There are, of course, a number of important changes affecting tax and savings coming in April 2017 which were announced back in the March 2016 Budget.

Personal allowance threshold rises

From April 2017, the personal allowance threshold rises to £11,500, an increase of £500. It’s planned to rise to £12,500 by the end of the Parliament.

Higher income tax threshold is going up

In a welcome boost if you are a higher- or additional-rate taxpayer, the point at which higher rate income tax (40%) applies goes up to £45,000, an increase of £2,000. This will reach £50,000 by the end of this Parliament.

IHT residence nil rate band

From April, an extra £100,000 IHT nil rate band is being introduced where a family home is passed on to direct descendants.

From April, an extra £100,000 IHT nil rate band is being introduced where a family home is passed on to direct descendants.

Lifetime ISA is due to launch

Those under the age of 40 will have a new savings option to help them onto the property ladder. Up to £4,000 a year can be paid into the Lifetime ISA and receive a 25% Government Bonus. First time house buyers can access their fund tax free prior to age 60.

The £20k ISA Allowance


Thanks to a well-above inflation increase to £20,000, savers will have an extra £4,760 of tax-free savings within an ISA.

Corporation Tax cut again


From 1 April 2017, Corporation Tax will be cut to 19% and drops to 17% in April 2020.

If you own a business, you may want to consider your pension funding ahead of any rate cut to reduce profits which might otherwise by taxed at the higher rate.

 

We’ll be following up on many of these topics in our MoneyPlus blog.

The information in this blog or any response to comments should not be regarded as financial advice.  This is based on our understanding in November 2016. Laws and tax rules may change in the future.

Join the conversation on twitter@standardlifeUK and Facebook

 

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