2016 Autumn statement highlights

Unlike in previous years the 2016 autumn statement was strangely bereft of anything significant on tax. This is especially unusual given that it is the first delivered by a new chancellor, but it is perhaps due to the raft of measures that surfaced across the preceding 12 months.

Below is a summary of the main tax measures that were included in the chancellor’s statement. But before we get to that, the most important news is that this is the last autumn statement (we hope) ever. We are told that we will now only experience one budget per year – in March. This is very welcome news indeed.

It is also important to remember that whilst nothing further was announced on tax changes that are expected in the 2017 budget, the changes affecting non-doms and the introduction of making tax digital, will almost certainly still happen. In fact, we expect to receive draft legislation for the 2017 Finance Bill in the first week of December. Once we have digested this, we will of course let you know our thoughts. Here are the highlights of the last ever autumn statement.

Personal tax

  • The personal allowance will increase to £11,500 for 2017/18 and the higher rate threshold will increase to £45,000.
  • The government reaffirmed its commitment to increase the income tax personal allowance to £12,500 and higher rate threshold to £50,000 by the end of this parliament.
  • The annual ISA subscription limit will increase from £15,240 to £20,000 from 6 April 2017, while the Junior ISAs and Child Trust Funds limits will increase to £4,128.
  • The money purchase annual allowance will be reduced to £4,000 from April 2017.

Employment tax

  • New lower company car benefit bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1%.
  • From April 2018 employers’ NIC will also apply to termination payments over £30,000 that are subject to income tax.
  • The tax and employer NIC advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, cycle to work schemes and ultra-low emission cars.
  • Tax advantages for employee shareholder shares will be abolished for arrangements entered into on or after 1 December 2016.

Company tax

  • It was confirmed that the reduction in the corporation tax to 17% from 1 April 2020 will go ahead as planned.
  • Companies will get 100% first-year allowances on charge-points for electric vehicles for expenditure between 23 November 2016 and the end of March 2019.
  • Interest claimed by large groups will be limited from April 2017 where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and a group UK net interest to earnings ratio in excess of the ratio for the worldwide group.
  • From April 2017 the amount of company profits that can be offset by carried-forward losses will be restricted to 50%, subject to a £5 million allowance for each standalone company or group. Greater flexibility will be given over the types of profit that can be relieved by losses incurred after that date.
  • From April 2017 the investing requirement for substantial shareholding exemption will be removed, while there will be a more comprehensive exemption for companies owned by qualifying institutional investors.
  • Annual ATED charges will increase in line with inflation for 2017/18.

Anti-avoidance

  • A new penalty will be introduced for any person enabling another to use a tax avoidance scheme which HMRC later defeats.

VAT

  • From 1 April 2017 the government will introduce a new VAT flat rate scheme with a 16.5% rate. This will be for businesses that have limited costs, such as many labour-only businesses. Anti-forestalling provisions will also be introduced.

Further information

If you believe that any of the changes highlighted above effect you, please contact one of the CBW tax team on +44 (0)20 7309 3800 or email us at info@cbw.co.uk.

About the Author

Robert Maas

Tax Consultant +44 (0)20 7309 3800