The Autumn Statement 2016 - Highlights

• There will be new tax penalties on the implementation of tax avoidance schemes which are challenged and beaten by HMRC at a later date
• The tax advantages associated with employee shareholder schemes are to reviewed

• The tax benefits associated from salary sacrifice arrangements will be removed so that individuals will pay the same tax as if they had received cash. Pensions, child care, low emission cars and cycle to work schemes will not be included
• Minimum wage will rise to £7.50 per hour from April 2017
• The Personal Allowance will increase to £11,500 in April 2017 and to £12,000 by 2020. Thereafter it is planned to increase with CPI
• The Basic rate tax band will extend to £50,000 by 2020
• National Insurance for both employers and employees is to be aligned at £157 per week from April 2017
• The tax rates and allowances in Scotland may differ from those set out above

• The pension Annual Allowance will decrease from £10,000 to £4,000 per annum for those individuals who are already drawing an income from their pension (see below)
• A new NS&I savings bond will be announced in the Budget where the expected interest rate will be 2.2% on a maximum investment of £3,000 for 3 years

• Corporation Tax rates will fall to 17.5% from 2020

Reduced Money Purchase Annual Allowance – Think before drawing an income

The Chancellor announced just one cut to pension allowances. The Money Purchase Annual Allowance (MPAA) is set to be cut from £10,000 to £4,000 from April 2017 (subject to consultation). This only affects those clients who have accessed their DC pensions under the new pension flexibilities and continue to pay into their pension.

For many, the first time they dip into their pensions will be the day they stop work. So a drop in their annual allowance is of no significance. But some may wish to phase their retirement, perhaps by cutting their working hours.

These individuals may still wish to continue funding pensions or more importantly could be benefiting from employer contributions. They may need the best of both worlds – their full £40k Annual Allowance and the option to dip into their pension savings if needed.

Remedy for bond gain pain – but prevention is better than cure

Investment bond owners who unwittingly face a large tax charge as a result of surrendering part of their bond will have a remedy from 6 April 2017.

Many bonds are set up with multiple identical segments for flexibility on encashment, allowing each segment to be cashed in independently. But a large surrender can also be taken from all the segments which may lead to an unexpected chargeable gain which bears no resemblance to the actual investment performance.

As more bond providers adopt the ‘ABI best practice’ on surrenders, the number of cases slipping through the net and requiring rectification should be minimal. However, savers who find themselves in these circumstances will be able to apply to HMRC to have the gain recalculated on a ‘just and reasonable’ basis. Further detail on how this will work is expected in Finance Bill 2017.

From April you may be entitled to an extra £100k IHT nil rate band where the family home passes to direct descendants on death. This is a particularly complex area of planning where the relief reduces for estates valued in excess of £2m.

Under 40s will have a new savings option which can help them to get a foothold on 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 ISA savings allowance is set to receive an above inflation increase. Savers will be able to enjoy an additional £4,760 of tax free savings bringing the total to £20,000 from April 2017.