Today the Chancellor of the Exchequer, Phillip Hammond, delivered what was his own first major budgetary speech and the first since Theresa May took power.
It was a fairly ‘quiet’ affair so far as previous budgets and autumn statements have gone.
In what had been billed as the statement for ‘JAM’s’ (just about managing families), the major announcements related to a further increase to the National Living Wage, which will rise to £7.50 from April, a ban on lettings agency fees for tenants and a commitment of £3.7bn to fund the building of 140,000 new affordable homes.
So far as financial planning is concerned there were only a few relevant announcements and even those will have limited impact.
It was announced that:
- The money purchase annual allowance (MPAA) – the annual amount individuals can contribute to defined contribution pensions after having previously accessed a pension flexibly – will be cut from £10,000 to £4,000pa. Introduced as a way of reducing ‘inappropriate double tax relief’, The Treasury anticipates it will make £70m from the move in 2017-18. Largely affecting those who have started to access their pension yet still continue to work, this move is somewhat of a blow, although it should be noted that ISA allowances are to rise to £20,000 a year from April 2017, providing a significant tax free savings environment.
- A new 3 year savings bond with NS&I will be introduced at a rate of 2.2% pa. However, the amount that can be saved will be capped at £3000 which will, at best, result in a mere £66 in interest per annum.
- Mr Hammond also reconfirmed that the tax free allowance for income tax would increase to £11,500 in April 2017, further rising to £12,500 by 2020. He further committed to previous pledges that the higher rate Income Tax threshold would increase to £50,000 by the end of the current parliament.
In many ways, the relatively benign nature of the Chancellor’s Statement was to be expected. With economic forecasts having been reduced in the wake of Brexit, continuing instability of the pound and uncertainty around Britain’s exit from the EU, this wasn’t the time for any major shockwaves.
However, with two Budget speeches to be made in 2017 ahead of changes to a single fiscal event in the form of an Autumn budget thereafter, perhaps Mr Hammond is simply holding back his ‘trump’ cards until next year.
For any advice in relation to the announcements made in today’s Autumn Statement, or to discuss your financial planning strategy with one of our IFA’s, please get in touch.