The UK has experienced plenty of political upheaval this year with the EU referendum followed by a change of leadership. The Chancellor, Philip Hammond, delivered his first Autumn Statement on 23rd November, which also turned out to be his last. His surprise announcement was that, after two Budgets in 2017, from 2018 onwards we will have a Spring Statement and an Autumn Budget.
The Chancellor presented his Autumn Statement against a background of reduced growth forecasts and the ‘urgent’ need to tackle the long-term weaknesses of the UK economy. His declared ambition is to make UK ‘match-fit’ for Brexit.
The emphasis of the Chancellor’s speech was on increased infrastructure spending, a stop on further new welfare savings measures and an acceptance that government borrowing will be significantly higher than previously projected.
The Chancellor made a number of tax-related announcements including:
- The tax and NIC advantages of most salary sacrifice schemes will be removed from April 2017, but there will be some exemptions, such as pension contributions.
- The government renewed its commitment to reduce the rate of corporation tax to 17% by 2020. It will also limit the tax deductions that large groups can claim for UK interest expenses from April 2017.
- The pensions money purchase annual allowance (MPAA) will be reduced from £10,000 to £4,000 from April 2017. This limit applies to people who have accessed their pensions flexibly and currently may therefore be getting tax relief on up to £10,000 of recycled pensions income.
- From June 2017 insurance premium tax will increase yet again, to 12%.
- There was the usual raft of anti-avoidance measures, including a new legal requirement to correct a past failure to pay UK tax on offshore assets.
There were many other important announcements which are included in our summary of the Autumn Statement. Please click here to view it.
If you think you may be affected by anything included in the Autumn Statement, please don’t hesitate to get in touch with us.
New statistics from HMRC show that cash is still a popular ISA investment, despite ultra-low interest rates.
In early summer the Financial Conduct Authority published a report looking at easy access cash interest rates for savings account and cash ISAs. The regulator surveyed the lowest rates on offer from 32 major providers and summarised its findings in the following table:
Range of lowest interest rates available on easy access cash ISAs at 1 April 2006
As these figures are now several months and one base rate cut out of date, the current numbers are likely to be even lower.
In spite of these low rates, recently released statistics from HMRC show that in the last tax year nearly £3 out of every £4 of ISA subscriptions were placed in the cash component. Overall total investment in ISAs is about 50/50 between the cash component and the stocks and shares component, but that reflects the fact that until July 2014 there were lower limits for cash investment.
If you hold cash ISAs, ask yourself:
- What interest rate am I currently earning? Be warned this might be going down soon because of the August base rate cut.
- Do I need an ISA to get tax-free interest on my cash? The personal savings allowance, introduced in this tax year, allows you to receive £1,000 of tax-free interest if you are a basic rate taxpayer (£500 if you are a higher rate taxpayer). At current interest rates, that represents a substantial deposit.
You can switch from a cash ISA to a stocks and shares ISA (and vice versa) and making the move now could significantly increase the income your ISA produces.
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. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.