DECEMBER 2016 - You say it best, when you say nothing at all . . . . .
……or very little anyway. The anticipation was high, Phillip Hammond’s first and only Autumn Statement. In an era of unprecedented change and a politically charged global arena, heightened with the drama across the pond, there was great anticipation of what would ensue. Were there to be sweeping changes to the pension regime? Or some wonderful tax structure for contributions or the ending of the Lifetime Allowance?
Well, no as it turns out; none of the above!
Overall, from a wealth management point of view, in many ways the Chancellor doing nothing drastic has been no bad thing on this occasion; it allows us to focus clients on taking the opportunities that they currently have. The main change was the Money Purchase Pension Allowance (MPPA) reduction from £10,000 to £4,000; exciting stuff. Many people will not come into contact with this as it affects those in a very acute set of circumstances, if you are interested in more detail on this get in touch separately and I’ll be delighted to go through it.
What it did bring to the fore again was the benefit of making a significant pension contribution before the end of the tax year 16/17 as this is looking ever more attractive for the following reasons:
- The reduction in Corporation Tax will mean that the Tax benefit to Employers of contributions is higher until the end of this tax year.
- Individual pension contributions via salary sacrifice will still remain a valid method of contribution. Thus saving National Insurance payments.
- Anyone who is considering utilising Carry Forward (particularly those who earning over £150,000 and have been caught by the reduced Annual Allowance this year) would be well advised that the last of the £50,000 years (2013/14) will drop off at the end of this tax year so use it now.
In other news, Legislation will be introduced in the Finance Bill 2017 in respect of Capital Investment Bonds with Life Insurance attached in order to amend the potentially penal system associated with part surrender. Watch this space for news on that.
Junior ISA’s and Child Trust Fund annual limit is up to £4,128 per year so now you can save more money for your children to waste, I mean spend wisely when they are 18, which of course is a behavioural mainstay of people that age. Although some would say that money spent on beer or wine is in no way a waste.
The main ISA subscription will be £20,000 per person next tax year, which we knew anyway, but it serves as a reminder that ISA’s can be a very good vehicle for saving over time to use later in life. Just five years of a married couple both subscribing the maximum gives £200,000 (and that’s without any growth) in a tax protected environment that can produce a tax free income….. for spending on Beer and Wine once you are retired! I see a pattern here, it must be a Christmastime blog.
Don’t forget the residential Nil Rate band for Inheritance Tax is coming in at the start of the 2017/18 tax year and every individual will potentially benefit from an extra £100,000 allowance. There are many permutations of how this may affect people, far too many for a blog like this, but one point of note is that if joint assets are over £2million then it’s worth a conversation with us; as at that point you begin to lose the allowance, so some planning is required.
Finally, tis the season to be jolly where you should of course drink loads, eat loads, buy everyone loads of gifts and then on the 5th January when you're pouring over your decimated bank account and there is nothing left but the memories and the extra inch on the waistline it’s always a good time to seek out the advice of a good Chartered Financial Planner……..or three. Merry Christmas and a Happy New Year.
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