- Elevate platform
- Tools and support
- About us
- Contact Us
- News and views
10 March 2017
While the Spring Budget didn't produce any show stoppers from a pensions and tax perspective, there are still a few highlights to be aware of:
To close the tax gap between the self-employed and employed, the self-employed class 4 National Insurance contributions will increase from 9% to 10% from April 2018, and will then rise to 11% from April 2019. The flat rate class 2 NICs for the self-employed will also be removed from April 2018.
As of April 2018, the dividend allowance will be reduced from £5,000 to £2,000. This is of particular significance to small and medium sized business owners who take their profits as a dividend. This means that extracting profits from their businesses via pension contributions will become more attractive, especially given the access now available once an individual attains the age of 55.
In a push to stop the loss of tax revenues through artificial avoidance schemes, anyone involved in the design or promotion of such arrangements, who may ultimately benefit from a client using it, will be subject to a financial penalty. This could be as much as the amount of tax avoided. Obviously this does not include well established IHT planning solutions (loan trusts and discounted gift schemes), or investing in offshore bonds.
QROPS transfers requested after 8 March 2017 will be subject to a new 25% tax charge, aimed at those who move their pension to 'third party' jurisdictions to avoid UK tax - although the charge will not apply to genuine cases where persons need pension portability. This measure will also help protect UK pension savers against overseas pension scammers.
While a Care ISA had been discussed in the media ahead of the Budget, the Chancellor announced that proposals for future funding of social care would be shared in a green paper to be published later this year. These options will not include a 'death tax'; a flat rate charge applicable to all estates.
Reminder of what's coming up in 2017/2018
Lifetime ISA introduction
To help under 40s on to the property ladder, up to £4,000 a year can be paid into the Lifetime ISA, receiving a 25% Government Bonus. The majority of first time house buyers can access their fund tax free prior to age 60.
£20k ISA allowance
With an above inflation increase, savers will be able to enjoy an additional £4,760 of tax free savings on their ISA.
Tax rates and bands
The personal allowance for 2017/18 is £11,500, with the higher rate threshold rising to £45,000 (£43,000 in Scotland). Increases are planned to £12,500 and £50,000 respectively by 2020.
The individual capital gains tax allowance will increase to £11,300.
IHT residence nil rate band
From April, if the family home passes to direct descendants on death, your clients may be entitled to an extra £100,000 IHT nil rate band.
Reduced Money Purchase Annual Allowance (MPAA)
For those who have accessed their DC pension under the new pension flexibilities and who wish to continue paying into their pension, the MPAA is to be cut from £10,000 to £4,000 from April 2017.
Corporation Tax cut
From 1 April 2017, the rate of Corporation Tax will be cut from 20% to 19%. A further cut to 17% will be introduced in April 2020.