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OTHER TAXATION PROPOSALS 2017/2018

8th March 2017 BUDGET PROPOSALS
AND CHANGES FOR 2017/2018 previously announced
(Subject to details in the Finance Bill)
Ellis Atkins have taken all due care in the presentation of these notes. No responsibility for loss occasioned to any person or company acting or refraining from action as a result of any material in these notes can be accepted by Ellis Atkins, its partners or staff. Please contact us or your own professional advisor for advice specific to your circumstances.

ISAs

The ISA allowance for 2017/18 will be £20,000.

Help-to-Buy ISA

A Help to Buy ISA scheme is currently available to 30 November 2019 for every first time buyer that saves. For every £200 that a first time buyer saves, the Government will top this up with £50 (up to a maximum of £3,000 on £12,000 worth of savings). The bonus is only available for those using the money to purchase a home for a value up to £450,000 in London and up to £250,000 elsewhere.

Lifetime ISA

From April 2017 any adult over 18 and under 40 will be able to open a Lifetime ISA saving up to £4,000 a year, which will receive a 25% bonus from the government (the Lifetime limit being £128,000) up to the age of 50. An individual can continue to save until they are over 60, using the money for their retirement or to buy their first home (subject to a maximum value of a property being £450,000 nationally). If the money is withdrawn before 60 the government bonus will be lost and a 25% charge will be raised unless the fund goes towards a deposit on your first property.

Savers will be able to save into both a Help to Buy ISA and a Lifetime ISA, but will only be able to use the government bonus from one of their accounts to buy their first home.

The total amount that an individual can save each year into all ISAs will be increased to £20,000 from April 2017.

A three-year NS&I Investment Bond with a market-leading interest rate of 2.2% will be available for 12 months from April 2017. It is available to everyone aged 16 and over with the flexibility to save between £100 and £3,000 over three years.

Life Insurance Policies – part surrenders and part assignments

Policyholders who have generated a wholly disproportionate gain will be able to apply to HMRC to have the gain recalculated.

Foreign Pensions -From 6 April 2017 the tax treatment of foreign pensions will be aligned to the UK pension regime. For Defined Benefit Pension Schemes in respect of those employed abroad, all lump sums paid out of funds built up before 6 April 2017 will be now subject to tax.

Qualifying recognised overseas pension schemes (QROPS) – A 25% tax charge will be made where pension transfers are made to a QROPS (although there are certain exceptions).

Abolishing tax returns

HMRC will automatically upload income and tax data into new digital tax accounts to enable some individuals and small businesses to be removed from their obligation to complete an annual return. This is to be brought in from April 2018 or 2019 depending on an individual’s circumstances. (Please see above).

Tax Avoidance

HMRC will introduce measures from 8 March 2017 to counteract promotors of tax avoidance schemes.

The Government will also be introducing a new penalty on those individuals or entities who enable the use of tax avoidance arrangements.

Offshore evasion

A new legal requirement will be introduced for those who have failed to declare UK tax on offshore interests as at 5 April 2017.

Cutting business rates for small businesses

From April 2017, small businesses that occupy property with a rateable value of £12,000, or less will pay no business rates. There will be a tapered rate of relief on properties with a rateable value up to £15,000.

From April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.

National Living Wage

The National Living Wage rises in April 2017 to £7.50 per hour for workers aged 25 or above. The National Minimum Wage for workers aged 21 to 24 remains at £6.95.

The Annual Tax on Enveloped Dwellings (ATED)

The ATED charge was extended to apply to properties worth £500,000 from 1 April 2016. From 6 April 2015 the annual charge was levied on residential properties worth between £1 and £2 million. Please note that a property needs to be revalued every five years; the first revaluation date is 1 April 2017.

Enterprise Investment Scheme (EIS)

The annual investment limit for EIS remains at £1 million for individuals with the income tax relief remaining at 30%. The annual investment limit for qualifying EIS companies remains at £5 million. Capital gains can be deferred if an investment in EIS shares is made one year before and three years after the gain.

Seed Enterprise Investment Scheme (SEIS) – Reinvestment Relief

An individual is still able to make an SEIS subscription of up to £100,000 in shares in a qualifying SEIS company and receive income tax relief of 50% of the total investment. A capital gain arising in the same year of the investment can also receive reinvestment relief and become exempt from capital gains tax.

Veterans will be able to keep payments from war pensions rather than using this to pay for social care

From April 2017, 4,000 Armed Forces veterans will be able to keep payments from their war pensions if they need social care.

State Pension

The state pension will change on 6 April 2017 for people who reach State Pension age on or after that date. The basic state pension is increased in 2016/17 to £159.55 per week.

Tax-Free Childcare for working parents

From April 2017, tax free childcare will provide up to £2,000 a year in childcare support for each child under 12. Parents will be able to receive up to £4,000 for disabled children up to the age of 17.

Parents of younger children will be able to apply for the scheme first, with all eligible parents able to access the scheme by the end of the year.

Working parents in England will also be able to apply for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.