Autumn Statement 2015: what can we expect?

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17/11/2015
Ahead of the Chancellor’s Autumn Statement on 25 November where he will outline his latest plans for the UK economy, the experts at Hargreaves Lansdown offer their predictions.

Pension taxation

On balance we think it is unlikely there will be anything on pension taxation next week. The Chancellor confirmed recently that we will see the Treasury’s final response to its pension tax consultation in the spring Budget of 2016. This doesn’t preclude some form of interim announcement in the Autumn Statement and given their sensitivity to the risks of a ‘buy-now-while-stocks-last’ from higher earners scooping up pension tax relief, it is just possible the Treasury will act in the short term to curb this.

New state pension

We’re hoping to hear news of the New State Pension (NSP). Confirmation of the full rate has been promised for the autumn. The minimum rate it can be set at is £151.25 but this would imply no inflation-linked increase of any kind from 2015 to 2016 (£151.25 is the Guarantee Credit amount for Pension Credit). The Guarantee Credit element of Pension Credit should be increased in line with earnings to around £155.50 (under provisions of the Pensions Act 2007), which should in turn mean the NSP being set at a similar level. Given the Chancellor’s need to find extra cash, perhaps a new definition of earnings will be employed to peg all the numbers back nearer to £151.25? The State Pension costs around £86.5bn a year; there are 1.67 million claiming the Guarantee Credit; the overall cost of Pension Credit (including the Savings Credit) is £6.57bn a year.

This does mean even a very subtle sleight of hand on the indexation of Pension Credit and the rate of the New State Pension could save the Chancellor a few hundred million pounds.

Secondary Annuity Market

Having announced a delay to the secondary annuity market earlier this year, the Treasury and the FCA have been working hard to develop a framework to allow annuity holders access to the pension freedoms. They are working towards a launch in April 2017; it is possible we will see some output from the Treasury alongside the Autumn Statement.

Pension transfers and early exit penalties

Back in the summer the Treasury launched a consultation to ensure pension investors can access the new pension freedoms easily and at reasonable cost. Evidence has been gathered regarding exit penalties, the process for transferring pensions and issues and concerns in relation to the provision of financial advice. A response to the consultation has been promised for the autumn.

IR35 Personal Service companies

A possible crack-down on these employment arrangements, said to be used by as many as 100,000 people could have a knock-on impact on individuals’ take home pay, on businesses tax and national insurance costs and workplace pensions. Anyone who has to be redefined as an employee rather than an external contractor could become eligible for auto-enrolment into the employer’s workplace pension scheme. Those using dividends as part of their remuneration strategy above the new tax-free allowance of £5,000 a year will also be caught with higher rates of tax from April 2016.

Help 2 Buy ISA

This launches on 1 December so we may get some details of how many cash ISA providers will offer the H2B ISA.

Crowdfunding investments in ISA

We may get a further consultation based on the summary responses to the initial consultation which closed on the 8 July 2015. Innovative Finance ISAs are due for launch in April 2016 for P2P products.

A Care Funding ISA

There have been calls for a Care Funding ISA, one which is inheritance tax free if not spent on care costs.

Peer-to-peer Loans

We should get more detail on the withholding tax which is due to apply to P2P loans from April 2017. Currently no tax is deducted. However interest from P2P loans will fall within the new Personal Savings Allowance from April 2016 (£1,000 for basic rate taxpayers and £500 for higher rate taxpayers).

Taxing Sporting Testimonials

The proceeds of retiring players’ testimonials are generally taxable. However it’s not clear cut. HMRC guidance suggests that where a player retired through injury or ill health, the proceeds of a testimonial might be free from tax. Since the summer Budget, the government has been consulting on whether there should be formal exemptions against tax, which could include the first £30,000 being tax free (like redundancy payments) and possibly exemptions where player’s retire through injury.

Keep an eye on YourMoney.com on Autumn Statement day to find out how the Chancellor’s plans will affect your finances. You can also sign up to our newsletter by visiting our homepage here.

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