This November’s Autumn Statement is both the first and last the Philip Hammond will deliver as chancellor. He announced that the Spring Budget will be replaced by a Spring Statement and an Autumn Budget in future.
The statement provided an opportunity to ‘steady the ship’ and re-assured the UK public following the summer Brexit vote and wider global political uncertainties.
We were told not to expect any ‘rabbit out of the hat’ moments and so it proved. Nevertheless, there were some points worth highlighting in the 20,000 word statement. We have summarised some of the key changes made:
Money Purchase Annual Allowance
The Money Purchase Annual Allowance (MPAA) is a limit placed on the amount you can contribute in to a money purchase pension once you have opted to access pension flexibility after the rule changes in 2015. The limit is intended to prevent pension savers from recycling their pension benefits to effectively double their tax relief. Contributions over the MPAA will be subject to an Annual Allowance charge at the individual’s marginal rate of income tax for earned income.
The limit was set at £10,000 when the MPAA was first introduced in 2015 and will be reduced to £4000 from 6th April 2017. A consultation on the detail will run until February 2017.
If you have taken pension benefits and are still contributing to a pension then this change might affect you. Contact your financial adviser if you are unsure or want to discuss this further.
The state pension is protected against inflation by what is known as the ‘triple lock’. The triple lock means that the state pension increases each year in line by the higher of inflation, the increase in average earnings or 2.5%. The chancellor announced that the triple lock will remain in place until the end of the current Parliament.
Pension Cold Calling
Some good news for consumers and reputable advisers alike was the announcement of plans to prevent pension cold calling along with other rules designed to deter pension scammers.
It was announced that the current IHT nil rate band of £325,000 will remain unchanged at this level until April 2021. From April 2017 an additional nil rate band will apply where a residence is passed on death to a direct descendant. The residence nil rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets are passed on death to direct descendants.
£15,240 in the current tax year to £20,000 in 2017/18. For those considering saving for children or grandchildren, the Junior ISA subscription limit will increase from £4,080 to £4,128 in line with inflation as measured by CPI.
The chancellor announced that the nil rate band will be extended to £11,500 with the basic rate limit increasing to £33,500 in the 2017/18 tax year. This will have the effect of increasing the higher rate band to £45,000.
Philip Hammond also reiterated his intention to increase the nil rate band to £12,500 and the higher rate band to £50,000 after which the changes in tax thresholds will track inflation as measured by CPI.