The personal allowance for 2017/18 will increase by £500 to £11,500 and the higher rate threshold to £45,000.
The intention is for the personal allowance to increase to £12,500 and the higher rate threshold to £50,000 by the end of this parliament.
After the personal allowance reaches £12,500, it will rise in line with CPI in future years.
The employee and employer class 1 national insurance thresholds are to be aligned from April 2017. This means that both employees and employers will start paying national insurance on weekly earnings above £157.
As announced at Budget 2016, class 2 national insurance contributions (NICs) are to be abolished from April 2018. The Autumn Statement confirms that self-employed contributory benefit entitlement will instead be accessed through the payment of class 3 or class 4 NICs.
All self-employed women will be able to access the standard rate of maternity allowance.
The government will remove NICs from the effects of the Limitation Act 1980 and Northern Ireland equivalent from April 2018. This will mean that national insurance debts may be collected in the same manner as other tax debts.
Off-payroll working rules
The government will reform the off-payroll working rules in the public sector from April 2017. The responsibility for operating the rules, and paying the correct tax, will move to the body paying the worker’s company.
This will mean that an individual operating through a company in the public sector may be forced to pay the same tax as a directly employed individual.
Property and trading income
As announced at Budget 2016, there are to be 2 new income tax allowances of £1,000 each for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income.
The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.
Termination payments over £30,000 which are subject to income tax after April 2018 will also be subject to employers national insurance contributions.
Following technical consultation, income tax will only be applied on the equivalent of an employee’s basic pay if the employee has not worked the notice period.
The first £30,000 of a termination payment will remain exempt from income tax and national insurance, subject to the existing rules on eligibility for the exemption.
Benefits in kind and expenses
The government will consider how the taxation of benefits in kind and expenses could be made more equitable in the following areas:
The tax and employer national insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, cycle to work and ultra-low emission cars. Arrangements in place before April 2017 will be protected until April 2018 and arrangements for cars, accommodation and school fees will be protected until April 2021.
The government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and requesting evidence on the valuation of other benefits.
A call for evidence will be published at Budget 2017 on the use of income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.
Non-UK domiciled individuals
Non-domiciled individuals will be deemed UK domiciled for tax purposes if they have been a UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin from April 2017.
Inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a trust or a company from April 2017.
The government will make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK to invest in UK businesses and to claim business investment relief from April 2017.
Pensions and savings
The ISA limit will be increased to £20,000 from 6 April 2017.
The band of savings income that is taxed at the starting rate of 0% will remain at £5,000 in 2017/18.
A new 3-year investment bond will be introduced from spring 2017, with an indicative rate of 2.2%. The bond will offer the flexibility to save between £100 and £3,000 and will be available to those aged 16 or over.
The money purchase annual allowance will reduce to £4,000 from April 2017. This is to prevent double pension tax relief being obtained when pension savings are recycled.
The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents.
A number of other changes are being made to foreign pensions, which include the closure of specialist pension schemes for those employed abroad to new saving.
Capital gains tax
The tax advantages linked to shares issued under the employee shareholder status will be abolished for arrangements entered into on, or after, 1 December 2016. The measure will remove the income tax reliefs and the capital gains tax exemption.
The tax treatment between onshore and offshore funds is to be equalised. Performance fees will not be deductible against reportable income from April 2017 and will instead reduce the tax payable on any disposal gains.
Social investment tax relief
From April 2017, a number of changes have been announced to social investment tax relief:
- the amount of investment social enterprises aged up to 7 years can raise through this scheme will increase to £1.5 million
- certain activities, such as asset leasing and on-lending will be excluded and an accreditation system will be introduced to allow nursing and residential care homes to qualify for relief in the future
- the limit on full-time equivalent employees will be reduced to 250
- the government will undertake a review of the scheme within 2 years of its enlargement.
Inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This will be effective from the date of royal assent of the Finance Bill 2017/18.
All employees required to give evidence in court will no longer need to pay tax on legal support that they may receive from their employer from April 2017. They will be in the same position as those requiring legal support because of allegations having been made against them.
Consult our team about your personal finances.