Chancellor abolishes Autumn Statement in his first Autumn Statement… and other news!
As it turns out, this was to be Chancellor Phillip Hammond’s first, and last, Autumn Statement.
His closing announcement in today’s Autumn Statement was that the Autumn Statement will be abolished and to be replaced by a Spring Statement, and an Autumn Budget from next year. It is intended that an Autumn Budget will allow for more scrutiny in advance of the new tax year.
Compared to the Budgets and Autumn Statements of recent years presented by former Chancellor George Osborne it was a relatively quiet affair with no “rabbits out of the hat” announcements.
Among the other headlines of the day, which included the state of the economy, infrastructure spending, growth forecasts, public spending and the like (not forgetting the deficit, of course), these are the key announcements which are of most relevance to our clients:-
The only significant pension announcement was that the Money Purchase Annual Allowance (MPAA) will reduce down from £10,000 a year to £4,000, subject to consultation on the matter. This will hit anyone who has accessed their pensions flexibly since the Pensions Freedoms were introduced in April 2015. The MPAA is the maximum amount that can be paid into a pension with tax relief and is triggered when a pension is accessed flexibly by, for example, entering Flexi-Access Drawdown. Those already in Capped Drawdown (who entered into Drawdown before April 2015 and have not accessed flexibly since) will not be affected.
The so-called “triple-lock” on the State Pension, which guarantees that the State Pension grows each year in line with the highest of either national average earnings, inflation or 2.5%, was protected once again.
The income tax threshold will rise to £11,500 from April (from £11,000 now) and will continue to rise to £12,500 by 2020. From this point it will start to increase in line with inflation each year, which will benefit low and middle income earners.
The higher rate band for income tax will increase to £50,000 by the end of the current Parliament, (from £43,000 now), benefitting middle to high income earners.
Tax savings for employer benefit in kind schemes via Salary Sacrifice will be stopped, with exceptions for low emission cars, cycling and childcare. The Chancellor also stopped short of limiting Salary Sacrifice for pensions.
A new NS&I savings bond was announced, with an interest rate of 2.2% for terms of up to three years. Savers will be able to invest up to £3,000 into one of these. This will be welcome news to savers, who have been hit by low savings rates for several years. It is expected to benefit around 2 million people.
Existing clients of Cambrian should contact their IFA if they have any queries about any of the announcements above.
If you wish to enquire about our services and seek advice on any of the Autumn Statement announcements, please call our team on 01244 539595 or use the contact forms on the website.