Save & Invest Financial Planning

Autumn Statement Commentary

Philip Hammond presented his inaugural Autumn Statement since becoming Chancellor earlier this year.  From a financial planning perspective, we have noted the following areas announced which may be of interest to our clients. 

Increased Personal Allowance for 2016/17

In line with the commitments of the previous government to increase the personal allowance to take more low-earners out of the taxable income band entirely, the personal allowance will increase to £11,500 from 6 April 2017 with a view to increasing to £12,500 by the end of parliament.

Combined with other tax-free allowances on savings and dividend income, this can mean individuals may be able to receive up to £17,500 each year as income before suffering any income tax.

He also confirmed his government’s intention to raise the threshold at which people begin paying higher rate tax to £50,000 by the end of Parliament.

Salary Sacrifice Arrangements for Employees

We welcome the Chancellor’s affirmed recognition that “salary sacrifice” arrangements remain an effective and important part of an employee’s financial planning with regard to tax-efficient pension savings, and paying for the costs of childcare.

He has also safeguarded the tax exemptions for such arrangements relating to low emission cars and cycling, but the tax treatment for all other salary sacrifice arrangements will be withdrawn from the next tax year as “unfair” luxury perks (such as gym memberships and mobile phone deals through employers).

Reduced Money Purchase Annual Allowance

The Money Purchase Annual Allowance restricts the ability of those already taking flexible pension income, for example from a pension drawdown arrangement established after 5 April 2015, to make further pension contributions to a “defined contribution” pension.  The current restriction is £10,000 and the Chancellor has proposed reducing this to £4,000 from 6 April 2017.

This measure will prompt anyone currently subject to the Money Purchase Annual Allowance to consider what further pension funding they may wish to contribute before tax year end. The government has announced a consultation on this proposed change.

NS&I Investment Growth Bonds

With continued low interest rates hitting savers hard, the Chancellor’s announcement that NS&I will offer Investment Growth bonds with an anticipated growth rate of 2.2%pa is a welcome relief.  Exact details will be released early next year closer to launch but these will be available to anyone aged 16 or over for a minimum investment of £100 up to £3000 per person.

 

As always if you feel these changes may affect you, please contact your usual Save & Invest adviser for further details.

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