Autumn Statement Summary

In the first Spending Review and Autumn Statement since the Conservatives came to power, the Chancellor set out how the government plans to continue to reduce the national deficit.

Whilst delays to amendments on pension tax relief and an increase in state pensions were welcome announcements for some, a freeze on ISA allowances and a hike in buy-to-let and second home stamp duties may have undone many savers’ plans on how to benefit from the new pensions freedoms that came into effect earlier this year.

Below is a summary of the key announcements that may affect our clients as they come into force over the next few years.

Pensions Tax Relief
Following the pension changes announced in the Summer Budget 2015 becoming law last week, a decision on any further amendments to the pensions tax relief system are to be announced in the Budget 2016.

State Pension
The Basic State Pension will rise to £119.30 per week from April 2016. This is part of the government’s ‘triple lock’ on pensions. Also, the starting rate of the new single tier state pension has been set at £155.65 per week from April 2016. This will apply to those reaching state pension age on or after 6th April 2016 who are entitled to a full pension, having enough ‘qualifying years’ of National Insurance contributions.

Auto-enrolment
Plans for raising the minimum contribution rates are to be delayed by 6 months, essentially bringing them in line with the tax years. The first increase from 2% to 5% will now come into effect on 6 April 2018 and the second increase from 5% to 8% will be on 6 April 2019.

Buy-to-let and Second Homes
As well as the previously announced restrictions on mortgage interest tax relief, an extra 3% SDLT will be charged on purchases of buy-to-let and second home properties costing more than £40,000 from 1 April 2016. It will not apply to purchases of caravans, mobile homes or houseboats, and the government will issue a consultation to consider if this should also apply to corporate or funds making significant investments in residential property.

Capital Gains Tax (CGT)
From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal, another blow for buy-to-let investors. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.

ISAs
The government will legislate to allow the ISA savings of a deceased person to continue to benefit from tax advantages during the administration of their estate and will set out further plans for introducing this measure in 2016. ISA and JISA/CTF annual subscription limits are to remain at their current levels of £15,240 & £4,080 respectively for the 2016/17 tax year.

Inheritance Tax (IHT)
The government announced it will bring in legislation in the Finance Bill 2016 to ensure that an inheritance tax charge won’t arise when a pension scheme member puts funds into drawdown, then dies before drawing the full amount. This change will be backdated to apply to deaths on or after 6 April 2011.

Digital Tax Accounts
The Government confirmed digital tax accounts are to be introduced for small businesses, self-employed individuals and landlords by 2016/17, requiring them to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. This will not however apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.

Small Business Rate Relief Scheme
The SBRR will be extended for another year to April 2017. The government is undertaking a review of business rates and will report on this at Budget 2016.

Note: These comments are based on announcements made in the 25 November 2015 Autumn Statement, which may change before becoming law.