Autumn Budget Statement Highlights
and Allowances for 2017-18
Chancellor Philip Hammond delivered, with unexpected confidence and wit, his first and last Autumn Statement back in December, his most notable point being that such statements are to end, reverting to solely a Budget each spring, the next set for Wednesday March 2017.
A summary of all salient points, including the tax rates and allowances announced can be found here to download, and print if you wish.
Pensions-wise the only point of note was a reduction in the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000 from April 2017.
The MPAA only applies to those who take £1 or more in pension income under the “Pension Freedom” opportunities such as Pension Income Drawdown. It is a clear message that you cannot expect to draw on your Pension early, then replenish the pot significantly, with tax-relief, from future earned income.
Please note, however, that you can access the full 25% of fund lump-sum, currently tax-free, should genuine need or good purpose arise, but touch £1 of taxable pension income and your ability to save more, including any company/employer contributions, will be seriously compromised.
For other Savers and Investors there were two significant announcements:
1. Confirmation that the 2017-18 ISA Allowance will increase to an impressive £20,000 – an excellent opportunity to shelter further capital from tax and, as importantly if not more, build a source of future tax-free income if required.
2. National Savings & Investments will be introducing an Investment Bond with interest of 2.2% p.a. and a 3 year term. Sadly the maximum deposit is a disappointing £3,000, but savers will still be grateful for small mercies just now.
Finally, for taxpayers in general, the Personal Allowance, the point under which no income tax is due, will increase again to £11,500 from 6th April 2017.
When the previous Coalition Government took over in 2010 the Personal Allowance was only a miserable £6,475 meaning even those on a very modest earned income or pension fell into the clutches of HMRC. Subsequent consistent raising of this starting point of tax has benefited millions of people and reduced administration for HMRC too, without the acclaim probably deserved.
A couple, both with their own income sources, can shortly enjoy £23,00 p.a. nearly £2,000 per month of tax-free income, and with income from ISAs also tax-free, not to mention the 25% tax-free cash element many have available as Pension Drawdown income, a number of our clients enjoy household income of £3,000 or more per month without a penny of tax due.
With careful, regular and purposeful financial planning, using the mainstream incentives and tax allowances available, it is entirely possible to build up a highly tax-efficient Portfolio of multiple future income streams, a combination of Pensions, ISAs, Investment Bonds and Savings, to enjoy a comfortable and fulfilling retirement .
That pretty well describes what we do. So, if you wish to build your retirement provision further, or know someone else who does, we would be delighted to assist.