Personal tax

Personal allowance and higher rate threshold

The personal allowance will rise to £11,500 and the higher rate threshold to £45,000 for 2017/18. The higher rate threshold is likely to be lower for Scottish taxpayers because the Scottish government has said that it intends to increase it by no more than the rate of inflation. 

The Chancellor re-confirmed the goal of a £12,500 personal allowance and £50,000 higher rate tax threshold by 2020. After that date the personal allowance will rise in line with the CPI rather than the national minimum wage, as previously proposed.

National insurance contributions (NICs)

The primary and secondary NIC thresholds for employees and employers will be aligned at £157 a week in 2017/18.

Class 2 NICs will be abolished from April 2018. For 2018/19 onwards, benefit entitlement for the self-employed will be based on their Class 3 and Class 4 NIC records.

Termination payments

From April 2018 termination payments to employees of over £30,000 (that are subject to income tax) will also be subject to employer NICs. This has been previously announced. Tax will only be applied to the equivalent of an employee’s basic pay if they have not worked their notice. The first £30,000 of a termination payment will normally remain exempt from income tax and NICs.

Off-payroll working rules

The ‘off-payroll working’ rules will change in the public sector from April 2017, with the responsibility for operating them and paying the correct tax moving to the body paying the worker’s company. As a consequence, the 5% tax-free allowance will be removed for those working in the public sector who are paid through companies.

Legal support

From April 2017, employees called to give evidence in court will no longer need to pay tax on the legal support from their employer.

Taxation of remuneration

Three measures have been announced on the treatment of remuneration other than in the form of a cash salary:

• Salary sacrifice The tax and NIC advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, cycle to work schemes and ultra-low emission cars. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
• Valuation of benefits in kind The government will publish a consultation on employer-provided living accommodation and will also ask for evidence on the valuation of all other benefits in kind in the 2017 Budget.
• Employee business expenses There will also be a call for evidence on tax relief for employees’ business expenses, including those that employers do not reimburse.

New tax allowances for property and trading income

From April 2017 two new income tax allowances of £1,000 each will cover trading income and property income, as announced in Budget 2016. Individuals with trading or property income below the allowance will not need to declare or pay tax on that income. The trading income allowance will now be extended to apply to certain miscellaneous income from providing assets or services.

Non-domiciled individuals  

From April 2017, non-domiciled individuals will be deemed to be UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust.

Also from April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust. The new rules were announced previously.

Inheritance tax reliefs  

Inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures. This change will take effect from Royal Assent of the Finance Bill 2017/18.

Company car tax  

For 2020/21, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting over 90g CO2/km will rise by 1%.

Starting rate for savings 

The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017/18.

Money purchase annual allowance

The money purchase annual allowance (MPAA) applies to individuals who have drawn any income benefits under the current pension flexibility rules. It was designed to limit pension income being recycled as fresh, tax-relieved pension contributions. The MPAA was initially set at £10,000 and will be reduced to £4,000 from April 2017, but there may be some exemptions following consultation.

Foreign pensions

The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by:

• Bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones.
• Closing specialist pension schemes to new saving for those employed abroad (s.615 schemes).
• Extending from five to ten years the period for UK taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief.
• Aligning the tax treatment of funds transferred between registered pension schemes.
• Updating the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Social investment tax relief (SITR)

From 6 April 2017, the amount of investment that social enterprises can raise through SITR will increase to £1.5m if they are no more than seven years old. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, but the government intends to introduce an accreditation system to allow these investments to qualify in the future. The limit on the number of employees will be reduced to 250 full-time equivalent.

Offshore funds

Performance fees incurred by offshore funds will not be deductible against reportable income from April 2017 and instead they will reduce any tax payable on disposal gains.

National Savings and Investments (NS&I) bond

For one year from April 2017, NS&I will offer a new ‘market leading’ three-year savings bond. The indicative rate is 2.2% but this may be adjusted to reflect market conditions at launch. The bond will be open to people aged 16 and over, subject to a minimum investment of £100 and a maximum of £3,000.

Life insurance policies 

Legislation will be introduced in the Finance Bill 2017 and will be effective from 2017/18, to counter the disproportionate tax charges that can currently arise in certain circumstances from life insurance policy part surrenders and partial assignments. This has been previously announced.

Personal portfolio bonds 

The government will create the power to amend by regulations the list of assets in which life insurance policyholders can invest without triggering tax anti-avoidance rules. The changes will be in the 2017 Finance Bill and will take effect from Royal Assent.

ISA, Junior ISA and Child Trust Funds

The annual subscription limit for Junior ISAs and Child Trust Funds will increase to £4,128. The main ISA subscription limit will increase to £20,000, as previously announced.