The new Chancellor, Philip Hammond, has announced the 2016 Autumn statement – his first (and last*) Autumn statement since he assumed this position in June.
The Chancellor announced changes to various items today but in this post I have focused on tax legislation and personal finances.
* Before the Autumn statement Hammond announced he would put an end to the Autumn statement, which suggested the Budget (announced in March) would become the only day of the year for major finance announcements. In reality he plans to switch the two so we will have a Budget announcement in Autumn 2017 and a new “Spring statement” in around March 2018.
Money Purchase Annual Allowance
This will be reduced from £10,000 currently to £4,000. You can read more about this here: Money Purchase Annual Allowance
The personal allowance (the amount you can earn before paying income tax) will increase from £11,000 currently to £11,500 from April 2017 (as planned).
Salary sacrifice involves an employee voluntarily giving up part of the salary they are entitled to receive in exchange for a benefit for their employer. For example an employee may give up £250 per month of their salary but in exchange their employer will pay £250 per month into the employee’s pension scheme by way of an employer pension contribution. This is normally done to reduce an employee’s National Insurance Contributions and income tax (and also to reduce their employer’s National Insurance Contributions).
The Chancellor announced today that this benefit will only be available for certain benefits (specifically pension contributions, childcare vouchers, cycling and ultra-low emission cars). This means other benefits – such as gym membership or a mobile phone – will be taxed without the benefit of salary sacrifice. While this is an unwelcome change for many people it could have been even worse – apparently the Chancellor did consider extending this to include pension contributions.
The band at which employees and employers start paying National Insurance Contributions will be brought in line with each other. This won’t make employees worse off but employers will be slightly worse off.
Insurance Premium Tax
This will be increased from 10% currently to 12%.
No changes announced.
Additional rate pension tax relief
No changes announced.
Housing & Buy to Let
No major changes.