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Budget Summary

22 November 2017

Alongside an extra £3 billion of funding to prepare for Brexit over the next two years, in the Autumn Budget 2017 Chancellor Philip Hammond announced the following:

No changes to the pension system

Given that the pensions freedoms are less than 3 years old the fact that there has been no further tinkering with pensions in this Budget was seen a welcome respite for UK savers

Tax

The personal tax allowance will rise from £11,500 to £11,850 per year from April 2018. The increase will mean a typical basic rate taxpayer will be £1,075 better off a year than in the 2010/11 tax year, the Chancellor said.

The higher rate tax threshold is to be increased to £46,350 in April 2018.

National Insurance Contributions (NICs) Bill

The government has announced that, to ensure there is enough time to work with Parliament and stakeholders on the detail of reforms that will simplify the NICs system, it will delay implementing a series of NICs policies by one year, i.e. the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.

Taxation of trusts

The government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer, and more transparent.

Tax evasion

The government will also look to change international corporate tax rules to ensure digital companies (e.g. that hold intellectual property in low-tax countries) pay a fair amount of tax.

Capital Gains Tax

The introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020. The capital gains tax allowance will increase by £400 to £11,700.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018-19.

ISAs

The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated in line with CPI to £4,260.

Lifetime allowance increase

The lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018-19.

Inheritance tax

The IHT nil rate band will remain at £325,000 until April 2021 and the residence nil rate band will increase from £100,000 to £125,000. In total that will mean that, from April, couples can leave assets up to £900,000 to future generation free of IHT. See also: Budget docs reveal IHT in HMRC crosshairs.

Save As You Earn scheme

Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme, increased from 6 months currently. The change will take effect from 6 April 2018.

Life assurance and overseas pension schemes

From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.

Stamp duty

Stamp duty land tax (SDLT) is to be abolished on homes under £300,000 for first-time buyers from 22 November. See separate story for comment.

The government will legislate in Finance Bill 2017-18 to improve the operation of the Higher Rates of SDLT by granting relief from tax in certain cases where:

• a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence

• a spouse buys property from their spouse

• a person buys a property in a child’s name or on a child’s behalf, where they are doing so in their capacity as the deputy of that child

• a purchaser adds to their interest in their main residence

The government will also introduce a new rule to prevent abuse of relief for replacement of a purchaser’s only or main residence, by requiring the purchaser to dispose of the whole of their interest in their former main residence and to do so to someone who is not their spouse.

The changes will have effect on and after 22 November 2017.

Alongside this the Chancellor announced 300,000 new homes a year would be built, with new financial support for house building to the tune of £15.3 billion over the next five years – taking the total to at least £44 billion. This includes £1.2 billion for the government to buy land to build more homes, and £2.7 billion for infrastructure that will support housing.

The government also plans to create 5 new ‘garden’ towns.

In addition, changes to the planning system will encourage better use of land in cities and towns, to allow more homes to be built while protecting the green belt.

Triple lock

The State pension will continue to rise by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension.

Venture Capital Trusts

In response to the Patient Capital Review the government will legislate in the ‘Finance Bill 2017-18’ to ensure the Venture Capital Schemes (Enterprise Investment Scheme (EIS), Seed EIS and VCTs) are targeted at growth investments.

Relief under the schemes will be focussed on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.

The changes will have effect for investments made on and after Royal Assent of Finance Bill 2017-18

VCTs will be moved towards higher risk investments by:

• removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018.

• requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within [12] months after the end of the accounting period, with effect on and after 6 April 2018.

• increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019.

• increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019.

• introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.

EIS 

The limit on the amount an individual may invest has been doubled from £1 million to £2 million from April 2018, earning investors up to as much as £600,000 in tax relief. The treasury estimates that 4,000 investors a year will benefit from the increased limit. See separate story for comment.

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