Earlier today the Chancellor announced the latest steps in the
Government's economic plan, aiming to deliver a responsible recovery
from the financial crisis.
Here is a summary of the main points to come out of the Autumn Statement.
Personal tax and welfare
- Transferable tax allowances for married couples - From 2015-16 spouses and civil partners will be able to transfer £1,000 of their income tax personal allowance to their spouse or civil partner. Couples where neither partner is a higher or additional rate tax payer will be eligible to transfer. The transferable amount will be increased in proportion to the personal allowance.
- Employer National Insurance contributions for the under 21s - The government will abolish employer NICs for those under the age of 21 from April 2015, with the exception of those earning more than the Upper Earnings Limit, which is £42,285 a year (£813 per week) in 2015-16. Employer NICs will be liable as normal beyond this limit. This will be legislated for in the NICs Bill currently before Parliament.
- Tax exemption for employer-funded occupational health treatments - As announced at Budget 2013 the government will introduce a tax exemption for amounts up to £500 paid by employers for medical treatment for employees. In response to consultation the government will extend the exemption to medical treatments recommended by employer-arranged occupational health services in addition to those recommended by the new Health and Work Service.
- Income tax relief for qualifying loan interest - From April 2014, the income tax relief for interest paid on loans to invest in close companies and employee-controlled companies will be extended to investments in such companies resident throughout the European Economic Area (EEA).
- Social investment tax relief - The government will introduce a new tax relief for equity and certain debt investments in social enterprises with effect from April 2014. Organisations which are charities, community interest companies or community benefit societies will be eligible. Following consultation, investment in social impact bonds issued by companies limited by shares will also be eligible. The government will publish a roadmap for social investment in January 2014.
- Venture Capital Trusts (VCTs): changes to scheme - Following a consultation over the summer, investments that are conditionally linked in any way to a VCT share buy-back, or that have been made within 6 months of a disposal of shares in the same VCT, will not qualify for new tax relief. This change will take effect from April 2014. The government will also consult further on potential changes to VCT rules to address the use of converted share premium accounts to return capital to investors where that return does not reflect profits on the VCT's investments. To continue to facilitate use of VCTs by different types of retail investors, the government will change the VCT rules so that investors can subscribe for VCT shares via nominees.
- Individual Protection - The government will introduce individual protection 2014 (IP14) as a consequence of the reduction in the lifetime allowance to £1.25 million from 6 April 2014. Individuals with IP14 will have a lifetime allowance of the value of their pension savings on 5 April 2014 subject to an overall maximum of £1.5 million. (Finance Bill 2014)
- Tax relief on loans to purchase life annuities - Following a consultation launched at Budget 2013, the government has decided not to legislate to withdraw relief for interest on loans taken out to purchase life annuities by people aged 65 or over before 1999.
- Announcement of new ISA annual subscription limits - The government will uprate the ISA, Junior ISA and Child Trust Fund annual subscription limits in line with CPI. The 2014-15 ISA limit will be increased to £11,880 (half of which can be saved in a cash ISA). The Junior ISA and Child Trust Fund limits will both be increased to £3,840.
- State Pension age - Future changes to the State Pension age will be driven by a guiding principle that people should expect to spend, on average, up to a third of their adult life in receipt of the State Pension. This implies that the increase in State Pension age to 68 could come forward to the mid 2030s, and the State Pension age could increase further to 69 by the late 2040s. Under previous government plans the state pension age was set to rise to 68 in 2046 and 69 in around 2056. These changes will now come in a decade earlier and UK pension age to rise to 68 in mid 2030s & 69 in late 2040s, based on life expectancy.
- Voluntary National Insurance - In October 2015 the government will introduce a new class of voluntary NICs to allow pensioners who reach State Pension age before 6 April 2016 an opportunity to top up their Additional Pension records.
- Uprating of pensions benefits and tax credits - The government confirms that: the basic State Pension will be uprated by the triple guarantee: the higher of earnings, inflation or 2.5%. This means in April 2014 the basic State Pension will rise by 2.7%. This is a cash rise of £2.95 for the full basic State Pension. The standard minimum income guarantee in Pension Credit will rise by the same amount as the cash increase in the basic State Pension. The Savings Credit threshold will rise by 4.4%. The net effect of these 2 measures is broadly cost neutral, the remaining benefits and tax credits which are not being uprated by 1% (as set out in Autumn Statement 2012) - including disability benefits, carers benefits, premia, and the Additional State Pension - will be uprated by 2.7% in April 2014, in line with inflation.
- From April 2014, the income tax personal allowance will be increased to £10,000, and a typical basic rate taxpayer will pay £705 less income tax per year in cash terms than they would have in 2010-11.
Capital Gains Tax
- Private Residence Relief - The government will reduce the final period exemption from 36 months to 18 months from April 2014.
- Non UK Residents - The government will introduce CGT on future gains made by non-residents disposing of UK residential property, from April 2015. A consultation on how best to introduce the new CGT charge will be published in early 2014.
You can view the full Autumn Statement on the Government website (PDF).
Source: HM Treasury Autumn Statement Report December 2013