The Treasury has confirmed that the Autumn Statement will be on 23 November.
When George Osborne was replaced as Chancellor in July, his successor, Philip Hammond, deliberately avoided taking any action. He left the immediate economic response to Mark Carney and the Monetary Policy Committee at the Bank of England, which duly cut interest rates to 0.25% and announced £70bn more quantitative easing (QE) in early August.
Mr Hammond did say that he would consider a “fiscal reset” in the Autumn Statement if data available by then suggested it was necessary. We already know that the new Chancellor has abandoned his predecessor’s goal of a budget surplus by 2019/20, but beyond that, what form a ‘reset’ could take is unclear.
Shifting the target
The latest UK public finance figures show that government borrowing in the first five months of the year was £4.9bn below the level in 2015/16. Given that Mr Osborne’s Spring Budget forecast represented a cut of £21bn from last year, it looks most unlikely his successor will reach next April on target. It is arguable that the higher than planned borrowing is effectively a “reset” in itself, leaving Mr Hammond little additional room for manoeuvre.
However, that might not prove to be the case. The “not just the privileged few” rhetoric of Theresa May has prompted some suggestions that her new Chancellor may take a different line on tax. For example, a more egalitarian approach to pensions could be to introduce the flat rate of contribution tax relief which Mr Osborne shied away from in March. Depending upon the rate chosen, such a move could also generate additional funds for the Treasury to use in boosting the economy, e.g. via spending on infrastructure and housing.
The Autumn Statement looks set to be the most important for some time and we’ll be covering the key outcomes in our Autumn Statement summary which will be on our website soon after the 23rd November.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
In August, HMRC published a consultation document on adding a new weapon to its anti-avoidance armoury: penalties on ‘enablers’.
While many were enjoying their holidays, HM Revenue & Customs (HMRC) released yet another paper examining ways of “strengthening tax avoidance sanctions and deterrents”.
Over recent years, HMRC has been gaining the upper hand in its unending battle with promoters of aggressive tax avoidance schemes:
- There is now a broad requirement on promoters to provide details of schemes to HMRC under the disclosure of tax avoidance scheme (DOTAS) rules.
- A General Anti-Abuse Rule (GAAR) was introduced in 2013. The latest Finance Bill, still stuck in the parliamentary process, contains measures creating tax-geared penalties for cases caught by the GAAR.
- The 2014 introduction of accelerated payment notice legislation, effectively removing the cash flow advantage of many schemes, has raised over £2.5bn, with more than 50,000 notices issued.
- Only last month HMRC won two major tax avoidance cases involving in excess of £820m in tax and outstanding interest.
- The current Finance Bill also contains measures to attack certain “disguised remuneration” schemes set up in the Noughties which HMRC had failed to defeat in the courts. Those affected will have to clear loans they had thought were never going to be repaid or face a large tax bill.
HMRC’s latest stance is that “The people who introduced users to the avoidance, or facilitated its implementation, bear limited risk or downside when avoidance arrangements are defeated by HMRC.” Arguably this is untrue, as those who devise or promote failed schemes could suffer reputational damage and/or legal action from their disappointed clients. However, that risk is not enough in HMRC’s view and it is now proposing that anyone in the “a whole supply chain of advice and intermediation” of tax avoidance should be subject to penalties. At this stage there is no settled basis, but one option the document suggests is to base the penalty for each party involved on the amount of tax supposedly avoided.
It must be stressed that the HMRC paper is not targeting general tax planning, such as making full use of annual exemptions, allowances and reliefs explicitly provided in legislation. These tactics can still deliver useful tax savings without provoking unwelcome enquiries.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
New statistics have been published showing just how much has been withdrawn in the first year of pensions freedom.
In August, the Association of British Insurers (ABI) published data showing how much had been withdrawn from pension arrangements in the 12 months to April 2016, the first year in which the pension flexibility reforms introduced by George Osborne had full effect. In total:
- £4.3bn was paid out in 300,000 lump sum payments, with an average payment of £14,500; and
- £3.9bn was extracted via 1.03m drawdown payments, with an average payment of £3,800.
The headline of the press release from the ABI said “Majority take sensible approach, but signs some withdrawing too much too soon”. Indeed, the ABI statistics showed that in the first quarter of 2016, over half of all withdrawal rates were less than 1%, whereas fewer than 1 in 23 had withdrawal rates of 10% or more.
Perhaps unsurprisingly, the media took a rather different approach, with headlines such as “Insurers warn that some people may be plundering pension pots too soon, raising concern money will run out”
There is no doubt that for some people the money will run out, but that is not necessarily a disaster. What is forgotten in this welter of numbers is that pension flexibility means just that and it can be used in a variety of ways. For example, if you have final salary pension which starts to pay out at age 65, but you choose to retire at 60, you could bridge the five-year income gap by running down your other pension savings over that period.
One point is crucial however, and that is expert advice. The level of withdrawals needs to be tailored to your personal circumstances and its appropriateness reviewed regularly. Although the possibility is not often considered, those who take too cautious an approach to withdrawals can end up suffering a lower living standard than they could have enjoyed. Their heirs may benefit, but is that what they wanted? Advice can help mitigate such situations.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.