Out of the 110 changes in the Autumn Statement here are highlights:
Pensioners will enjoy a 8.5% pension boost from April 2024 to £221 per week. The old pension will also increase to £169 from £156 per week.
Class 1 employee NIC is to be cut down from 12% to 10% from 6th January. If you use salary sacrifice to top up your pension you may wish to review your payments.
For the self-employed, Class 2 will be abolished from April 2024. Plus Class 4 will drop from 9% to 8%. If your self-employed earnings are below £6,725 you may wish to continue to pay Class 2 to build up NI credits.
Rules on having multiple lSAs has been relaxed to make administration easier from April 2024.
Income tax allowances and dividend rates have not changed. Also corporation and Vat tax rates were not changed. Neither was IHT affected. The point that additional income tax rate comes into effect will stay at £125,140.
The Income Tax Self-Assessment (ITSA) form for PAYE employees, will not be required after April 2024.
Guidance on training costs for the self-employed is being reviewed to provide more clarity on what is deductible.
The government has confirmed that the pension lifetime allowance will be scrapped from pension rules from April 2024.
Please also remember to keep your Will up-to-date and advise your executer where the original is kept. Also if your beneficiaries have changed please review whether your pension ‘expression of wishes’ needs updating.
N.B. This information is based on announcements made in November 2023 Autumn Statement which may change before becoming law.
Spring budget 2023
Let’s hope that the chancellor’s
budget keeps us out of a technical recession even if it feels like one. There
are also a number of initiatives to encourage people back to work and hopefully
‘inflation’ will continue to come down.
Most allowances and rates were not changed in the budget, so I will not repeat
them here.
Pensions
- The Life Time Allowance (LTA) charge on a pension of £1,073,100 has been removed
- The maximum tax free lump sum without LTA protection is fixed at 25% of £1,073,100 (£268,275)
- If you have LTA protection you can now top-up your pension again
- The pension annual allowance on contributions has been increased to £60,000 up from £40,000 from April
- For additional rate tax payers, the taxable ‘adjusted income threshold’ has been increased to £260,000. However, the ‘threshold income’ figure is to remain at £200,000.
- If you have started to take an income from your pension and then go back to work you are now allowed to reinvest £10,000, up from £4,000 (The Money Purchase Annual Allowance).
Voluntary NI contributions – If you have not started taking your state pension please check to see if you have any gaps in your contribution history via the government gateway https://www.gov.uk/log-in-register-hmrc-online-services . You require 35 years to receive a full pension and it is probably worth topping up if you are short. Before you hand over any money it might be an idea to check that its worth topping up by calling the Pensions Centre helpline 0800-731-0175.
The annual CGT exemption is to be cut to £6,000 from £12,300 in April. So please review your investments to see if you need to crystallise any gains and do this before 5th April.
The dividend tax allowance also goes down to £1,000 from £2,000 after April.
The Income tax free personal allowance of £12,570 and higher tax threshold of £50,270 are frozen until 2028. The 45% additional rate tax threshold will be lowered to £125,140 from £150,000 after April.
Please remember that if you are retired and one of you has a taxable income below £12,570, the marriage allowance allows you to transfer £1,260 to the other partner. Potentially saving £250 per year. If you have not claimed before, you can backdate it to 2018.
Additional childcare support will be phased in to help young families over the next 2 years.
The ‘Energy Price cap’ has been extended for 3 months. But please note that the government’s Energy Bill Support Scheme payment of £67 per month will end at the end of March.
The government have announced the Returnship initiative for the over-50s who want to retrain.
If you are affected by child benefit tax charge, this might be helped by topping up your pension to reduce your taxable income.
It might be an idea to top up your wine cellar as average duty will increase by 44p per bottle in August. At least the tax on a pint pulled in a pub has been frozen under the ‘Brexit Pubs Guarantee’.
Autumn Statement 2022 – summary
There were a number of changes, here goes:
- Tax allowances and thresholds will be frozen until April 2028. You can still earn up to £12,570 and not pay any tax and then 20% basic rate tax up to £50,270.
- The income tax additional rate threshold has been reduced down to £125,140 from £150,000. Therefore earnings from: £50,270 to £100,000 the rate of income tax is 40%, from £100,000 – £125,140 the marginal rate goes up to 60% (due to the allowance being removed) and then 45% above £125,140.
- The CGT annual exemption will be reduced down to £6,000 from £12,300 from April 2023. It will be reduce down further to £3,000 in April 2024. The rates will stay at 10% and 20% for a basic and higher tax payer accordingly. (18% and 28% for gains on property respectively).
- The dividend allowance will be halved down to £1,000 from £2,000 in April 2023 and halved again in 2024. The dividend tax rates will remain at 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively.
- One positive announcement for pensioners is that the triple lock will be maintained guaranteeing a 10.1% CPI-based increase for next April.
- The changes in National Insurance (NI) that were implemented this year have been scrapped and they are now kept in line with the annual personal allowance of £12,570. Class 1 employees pay: 2% between £9,100 and £12,570, 12% between £12,570 and £50,270. Employers pay 13.8% above £9,100. The lower earnings limit will be frozen at £6,240.
- Corporation tax will rise to 25% as originally planned in April 2023. 19% for profits below £50,000 and tapering up to £250,000. The Annual Investment Allowance of £1m has been made permanent. Also allowances for electric vehicle charge points have been extended to 2025.
- Increases have also been made to the Seed Enterprise Investment Scheme and also to Company Share Options Plans.
- The government will help out with your energy bills by paying £400 over the next 6 months (starting with £66 this month) directly to your energy supplier.
- The chancellor kept the changes to Stamp Duty Land Tax. The residential nil rate tax threshold was kept at £250,000. The threshold for First Time Buyers was increased to £425,000 from £300,000, with the maximum increased to £625,000.
Min-Budget
Well the mini-budget was certainly a fiscal
event. You have probably been inundated with commentary, but we will attempt to
summarise it for you.
Globally a shift is taking place as we transition from an era of disinflation
to a world of inflation and therefore higher interest rates. At the same time
the picture is complicated by supply chains being modified to compensate for
geopolitical challenges. Central banks only really have one weapon and that is
raising rates to remove liquidity from the markets.
The government wants to stimulate growth. It has already announced the Energy
Price Guarantee (EPG), capping the unit price for households and the Energy
Bill Relief Scheme for non-domestic energy customers.
It is also trying to put more money in our back pockets with the following:
- The Health and Social Care Levy Act provided a temporary increase in National Insurance contributions (NIC). This has been reversed and will come into effect on 6 November 2022.
- The reduction in income tax to 19% from 20% scheduled for April 2024 has been brought forward to April 2023.
- The residential nil rate tax threshold (stamp duty) is increased to £250,000 from £125,000 and for first time buyers £425,000 (£625,000 max) from £300,000.
- The dividend ordinary rate will be reduced back down to 7.5% and the upper rate back down to 32.5% from April 2023.
- Corporation tax will not rise and will stay at 19%.
- The Annual Investment Allowance (AIA) will not be reduced in April 2023.
- Investment Zones to be established and Enterprise Investment Schemes expanded.
- If you have been affected by the change in IR35 this has also been reversed.
However, the Chancellor did not handle the announcements well. He started by dismissing the Permanent Secretary to the Treasury. The Office of Tax Simplification will be closed. He also did not ask the Office of Budget Responsibility (OBR) to review the announcements (therefore it is not really a budget) and then announced that there were ‘more cuts to come’.
The markets did not like the uncertainty and promptly sold Sterling and increased the cost of government borrowing by selling UK government bonds (gilts). This then affected the defined benefit pension industry as the cost of liability matching pensions using derivatives increased. The pension industry then needed to increase the amount of capital (margin) to pay for the increase. This created a vicious recursive circle. The Bank of England (BoE) then stepped in to prop up the gilts market.
Going forward, the BoE only increased the bank rate by 0.5% to 2.25% on 22 September 2022. The next meetings are on 3 November and 15 December. There is a high probability that rates will go up on both dates. This will of course affect mortgage rates and if you are worried give Alastair a call in the office.
It looks like the Chancellor will be trying to balance the books. Simon Clarke, the new levelling up secretary has written to Whitehall departments asking them to ‘trim the fat’ and tackle the ‘very large welfare state’.
The Government’s strategy seems to be based on ‘Reaganomics’ from the 1980s. There will be more volatility in the markets for the foreseeable future; however this is normal market mechanics adjusting to the new regime. We are coming into the Q3 earning season but our companies will be able to pass through the increase in input costs from the energy rises feeding inflation price rises.
Autumn Budget 2021
The chancellor focused on the post covid recovery and did not tinker much with pensions and investments.
The key measure that we already knew about was the 1.25% increase to National Insurance and Dividend rates which will come into effect in April 2022. Due to Government IT constraints it will initially be collected via NI and in April 2023 it will be a separate tax called the ‘health and social care Levy’.
This Levy will be applied if your pay is above the primary earnings threshold of £9,568. You are caught if you pay yourself dividends above £2,000, and if you are working above the State Pension age.
Therefore the dividend ordinary rate, upper rate and additional rate will increase to 8.75%, 33.75% and 39.35% respectively.
For business owners the employer NI will also rise 1.25% to 15.05%. As corporation tax will rise in April 2023 it would be prudent to talk to your accountant to bring forward profits if possible.
Key allowances have not changed:
- High rate income tax band starts at £37,700 + £12,570 = £50,270
- Capital Gains Tax annual exempt amount is £12,300
- ISA annual subscription limit is maintained at £20,000 and JISAs £9,000
Budget 2021 – details
The Chancellor of the Exchequer Rishi Sunak has announced that
the bill for addressing the coronavirus pandemic is currently £407bn, which is
equivalent to 10x HS2 projects or 20 Crossrail’s.
Tax thresholds
The key financial changes announced in the budget are as
follows:
The basic rate income tax threshold has been slightly increased from April 2021
to £12,570 from £12,500 and the high rate threshold to £50,270 from £50,000.
The thresholds will then stay at these levels for the following 5 years.
The inheritance tax nil-rate band will remain at the existing level of £325,000
and also the residence nil-rate band of £175,000 until at least 2026. The
residence nil-rate band taper will continue to start at £2 million.
The capital gains annual exempt amount has also been frozen at £12,300 until
2026.
Dividends also escaped. The tax-free dividend allowance has been kept at
£2,000.
Pensions
The pension lifetime allowance has also been frozen at £1,073,100 until 2026.
The state pension will however rise by 2.5% next tax year and the triple lock
will remain in place.
Property
The 0% stamp duty land tax holiday on the first £500,000 has been extended
until 30 June 2021. The threshold will then be reduced down to £250,000 for a
further 3 months and then return back to £125,000 from October.
Lenders have been withdrawing from providing low-deposit mortgages. Therefore
to help first time buyers the government is guaranteeing 95% loan-to-value
mortgages up to £600,000.
Companies
From April 2023 corporation tax will increase for companies with profits above
£50,000. Tapering from 19% up to 25% above £250,000. This will affect the UK
companies, but as it is progressive and can be offset by ‘super deduction’ on
business investment as companies investing can benefit from a 130% first-year
capital allowance.
IR35 changes delayed from last year will go ahead in April 2021. Companies must
now collect income tax and NIC from the contractor’s fee and pay it over to
HMRC.
The furlough scheme will be extended until October 2021. However, employers
will be asked to contribute 10% in July and increased to 20% in August.
The trading loss carry-back rule has also been extended from the existing one
year to three years.
The VAT reduction for the UK’s tourism and hospitality sector has been extended
until October 2021 and reduced rate of 12.5% will then be applied until April
2022.
Business rate reliefs have also been extended to July 2021 and then a reduced
rate of 66% until April 2022.
Budget 2020
We have summarised Mr Sunak the new Chancellor’s 2020 budget for you.
- National Insurance (NI) threshold raised to £9,500 up from £8,632
- Pension taper increased to £200,000 from £110,000 – this helps pension funding restrictions
- Junior ISA annual limits increased to £9,000 from £4,368. Adult limit remains at £20,000.
- In the UK the income tax rates and allowances remain at £12,500 for the personal allowance and £50,000 the higher rate threshold
- The Capital Gains Tax (CGT) allowance has increased to £12,300 for individuals
- The Inheritance Tax (IHT) residence nil rate band increases to £175,000 taking the overall IHT allowance up to potentially £500,000 per person
- Entrepreneurs Relief lifetime allowance reduced to £1million
- Off-payroll working rules (IR35) reform still scheduled for April 2020
- Corporation tax rate to remain at 19%
Do you have any NI gaps?
Paying out for voluntary National Insurance contributions now could improve your state pension by up to £4,000 – but it’ll cost more if you wait until after 5 April 2019.
Anyone who reaches state pension age after 5 April 2016 and has a gap in their NI payments between the 2006-07 to 2015-16 tax years has until April 2023 to ‘plug’ the holes by making voluntary contributions. In the new tax year, the amount you pay for voluntary National Insurance (NI) will increase to a more expensive flat rate for all tax years. But, if you pay between £600 and £700 – the equivalent of £100 a week between now and April – you could pay off a missing year in your NI record and secure thousands of pounds of state pension when you retire.
Help for new mothers
From April, the government will rewrite child benefit forms to highlight the risks to stay-at-home parents’ retirement income if they fail to register for child benefit. The forms are available online and given to new mothers in hospitals.
Registering for child benefit allows parents with children under 12 to build up their entitlement to state pensions, even if they do not pay national insurance (NI) contributions.
However, a tax on child benefit for higher earners, introduced in 2013, has discouraged hundreds of thousands from claiming the perk. Since 2013, 516,000 parents have opted out of child benefit — 84% of them women.
About 1.1m families are affected by the tax charge on child benefit, which reduces payments when one parent earns £50,000 or more and wipes out the benefit for those who earn £60,000 and above. The rule applies to married and cohabiting couples.
Families with a higher earner can opt not to receive any child benefit. However, they still need to register and opt out. Parents who fail to do so miss out on the NI credits.
State pension payments will rise by 2.5 per cent next April
…the Department for Work and Pensions has confirmed.
From the 10th April 2017 the value of the flat-rate state pension, brought in earlier this year, will increase to £159.35 from the current rate of £155.60.
Under the Government’s controversial ‘triple lock’ manifesto commitment, the basic and new state pensions will rise in line with the highest of inflation, earnings or 2.5 per cent.
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