Take part in our new Family Business Survey and have your say! Click here
As a tax advisor, surveying our groaning shelves of legislation, all I ever want from a Chancellor is simplicity. To be fair, we weren’t expecting many changes to tax rules at this year’s Autumn Statement and fortunately our new Chancellor didn’t disappoint.
Acknowledging that he is as good at pulling rabbits from hats as Boris Johnson is at playing rugby, this was a very different style of presentation to that of George Osborne. Joshing of the opposition was much more good natured and there were fewer interventions from the Speaker. We even learned that the current Shadow Chancellor John McDonnell can’t dance - I’m not commenting on his predecessor Ed Balls!
Moving to the detail, for personal taxes the personal allowance, the amount you can earn before paying income tax, is due to increase again in April 2017 to £11,500. Higher rate taxes will kick in at £45,000. The Chancellor recommitted the Government to increasing these further, to £12,500 and £50,000, by the end of the Parliament.
Don’t forget though that for many people these limits are not the full picture. Income tax computations are often complicated by various allowances and special tax rates for investment income. From April 2017 there will also be further allowances, again previously announced, for people who earn less than £1,000 from trading or rental income.
There were changes to the salary sacrifice rules so the tax savings will, in future, apply to a much narrower range of benefits; the main ones to survive were pensions and child care costs. The National Living Wage received a boost, increasing to £7.50 from £7.20, from April 2017.
On the business side, there were very few changes with the Chancellor, in the main, confirming that previously announced policies would be retained. However, while making a big deal over falling rates of corporation tax, heading from 20% to 17% over coming years, with the next breath he raised concerns over rising rates of incorporation and consequent loss of revenue to HMRC.
At this stage all we know is that the Government will consult on how to sustain the tax-base and ensure that individuals working in different ways are taxed fairly. We presume that they will be looking at the varying tax rates (and taxes) applied to people in self-employment, partnerships or owner managed businesses compared to employed individuals.
Presumably this will form part of the 2017 Budgets – plural! Having got away fairly lightly this season, next year will be double trouble as the Chancellor has upended the Budget cycle. March 2017 will be the last Spring Budget and instead, we will move to annual Budgets in the Autumn. With the first of these in Autumn 2017 it will be twice the fun for tax advisors next year. Thereafter, March will become a Spring Statement in which the Chancellor promises he will not make significant changes.
Hopefully a better timed cycle will allow more consultation and better legislation for us all. Now that really would be a rabbit from a hat.
If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletterSubscribe
All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.
Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.
Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW
Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW