Autumn Statement 2016: The key points and their implications
The Autumn Statement represents Philip Hammond's debut as Chancellor and offers the first insight into the future of the UK's economy post-Brexit. With an end to austerity cuts and a renewed focus on investment, how will these plans affect our clients?
As trusted advisors to individuals and businesses, we've examined the legislation so we can offer timely and informed guidance. Here is our overview of the highlights and implications.
As previously indicated by the Government, the amount people can earn before they become eligible for income tax, referred to as personal allowance, will be raised to £11,500 from April 2017, with the higher rate income tax threshold rising to £50,000 by the end of the Parliament, providing a notable benefit to low and middle-income households and pensioners.
The Chancellor has cut tax savings associated with the salary sacrifice or 'benefits in kind' scheme, on items such as gym membership and computers. By enforcing limitations on the kind of goods and services that can be exchanged, some people will notice an increase in income tax and national insurance bills. However, the core elements; childcare vouchers, low emission cars, pensions and the cycle to work scheme will remain unaffected, safeguarding the more popular elements of the programme.
A new savings bond will be introduced, with a fixed rate of 2.2%. The three year bond is open to everyone over the age of 16, with a minimum investment of £100 and a maximum limit of £3,000, providing an incentive to savers.
Notable for our clients in retirement, there will be a limit on the amount of money that can be drawn tax-free from a pension pot and then recycled back, restricting the possibility of additional tax relief. The allowance falls from £10,000 to £4,000 in April 2017 impeding those who may rely on the flexibility of their pension. However, the continuation of the pension triple-lock, safeguarding the annual pension increase, has been welcomed.
The Autumn Statement brought further bad news for landlords following the higher stamp duty announced in April, with a new ban on letting agents' fees to tenants, which may result in the cost falling to landlords.
A new tax-relief scheme could encourage small-scale traders to become budding entrepreneurs, as the first £1,000 of gross income will not be taxable. This also applies to property income from renting individual rooms.
There has been some simplification on VAT for small businesses with the Flat-Rate Scheme (FRS), set at 16.5% for businesses with limited costs. Currently the percentage is determined by trade sector, however, businesses must now determine whether they meet the definition of limited cost trader. Our consultants will be advising clients on these issues, as it could result in a VAT increase for some.
What it means
Craig Harman is a tax specialist at our Tunbridge Wells branch and says there are no major surprises from a taxation point of view, as the main thrust of the statement was the impact on the economy post-Brexit.
He said: "The Government has confirmed it is still committed to raising the tax free personal allowance and higher rate of income tax as well as reducing the rate of corporation tax which will be welcome news for individuals and businesses already paying their fair share of taxes. However, the recent trend of cracking down on tax avoidance is set to continue with tougher penalties to be introduced for those deliberately investing in such arrangements."
Getting to grips with the changes
Perrys Accountants in Kent and London are on hand to help you and your business navigate the new budget.
In this ever-changing financial environment, we pride ourselves in our ability to provide robust and effective accountancy and tax planning services across a range of issues. As established accountants with an underlying ethos of being 'exceptional as standard', we can help with:
- Tax planning
- Inheritance Tax Planning
- Wills and Trusts
- Probate services
- Lasting Powers of Attorney
- Preparation of formal accounts
- Statutory audits
- Corporate finance advice
- Get Up and Grow™ (our exclusive meeting opportunity for start-ups)
- Company Secretarial support
- Expert witness and forensic accountancy support
- Specialist advice for the buy-to-let property market
To find out how Perrys Chartered Accountants in Kent and London can benefit you or your business, please call us or visit your nearest branch:
Please note that this article does not constitute financial advice – it is general in nature and intended to be informative. Perrys advise that individuals should always seek the advice of a qualified and registered accountant or financial adviser in relation to their specific circumstances.