As ever the Chancellor starts his speech by quoting a number of statistics that never end up materialising! At least on this occasion he has confirmed that the government no longer seeking a budget surplus in 2019-20 - Mr Hammond says he is committed to returning public finances to balance "as soon as practicable"
Key Facts for Smart Financial Clients
For clients whose pensions are in Drawdown, their annual allowance for contributions is reduced to £4,000 from £10,000.
- This will make it even harder to replace pension funds that have been taken out. Even more thought will be required before taking money out of pensions in the future.
‘Triple lock’ for State pensions to be reviewed for the next parliament, guaranteed for this parliament.
- Almost certainly the triple lock i.e. state pension payments growing by the highest of 2.5%, earnings inflation or price inflation will be lost in the next parliament.
Personal allowance increases to £11,500 in April 2017. Commitment to increase to £12,500 and Higher Rate tax band to £50,000 by the end of parliament. Afterward those thresholds are reached the allowances will automatically rise inline with inflation.
- This is generally good news as it allows more money to be earned or taken from investments / savings without triggering a basic or a higher rate tax bill. This, alongside the £5,000 allowance on dividends, will allow us to be creative as to how income is taken to minimise the tax paid.
NSI bond to be announced at budget, expected to be a 3 year bond for 2.2% limited to £3,000 investment
- As Inflation is excepted to comfortably more than 2.2% and the level of investment is disappointingly low. Feels more like a gimmick rather than a real offer for savers
Key Facts for children / grandchildren of Smart Financial clients
Capital spending on house building in this parliament to double. He suggests that the Help to Buy ISA and Help to Buy: mortgage guarantee will be key in this.
- So far, these support structures have been damp squibs and the take up of the ISA very poor not least because of its inability to be used to pay the down payment deposit for the property! Unlikely to make any real difference and the struggles for younger people to buy houses to continue.
From April 2017 Salary sacrifice will lose the tax savings.
- The Chancellor has specifically excluded childcare and cycle-to-work schemes but no mention of protecting pension contributions. This could have a serious impact on the ability of people to save into their pensions, salary sacrifice cal provide an additional third on the amount contributed
Key Facts for Businesses
- Corporation tax to fall to 17% as previously announced.
- April 2017 align employee and employer thresholds for National Insurance. Will cost employers £7 per employee per annum.
- National Living wage will increase from £7.20ph to £7.50 in April 2017.
- Insurance Premium Tax to rise for 10% -12% from June 2017.
- Universal credit taper rate reduced from 65% to 63%.
- Fees to tenants banned, they will be paid by landlords
- Consult to ban pensions cold calling.
The chancellor concludes his Autumn statement by announcing that he will be abolishing it! From 2017 onwards there will be an Autumn budget only.
As ever in the budget / Autumn statements the devil is in the detail that is released after the Chancellor has spoken, updates will follow as news becomes available.
Steve Martin CFPᵀᴹ Chartered MCSI, IMC