The Treasury has published its second Finance Bill of 2017 to legislate for proposals made in this year’s Budget that were abandoned when the Government called June’s General Election.
Key announcements include:
The money purchase annual allowance reduces to £4,000 (currently £10,000) from 6 April 2017. This limits the amount of pension contributions that can be paid by some individuals who have begun drawing benefits from their money purchase pension.
The dividend tax allowance reduces to £2000 (currently £5,000) from 6 April 2018. This will reduce the amount of dividends an individual can receive before they incur a tax liability.
The introduction of an income tax exemption to cover the first £500 worth of pensions advice provided to an employee in a tax year. The advice can cover not only pensions, but also general financial and tax issues relating to pensions.
A process for policyholders who have part surrendered life policies to apply to HMRC to recalculate chargeable gains where the part surrender has resulted in a ‘wholly disproportionate’ tax charge.
Provisions for certain non-domiciled individuals to be treated as if they were domiciled in the UK for the purposes of income tax and capital gains tax from 6 April 2017.
Changes to the domicile rules for IHT which come into effect from 6 April 2017:
Anybody who has been resident in the UK for at least 15 out of the previous 20 tax years is to be treated as UK domiciled for IHT purposes. It was previously 17 years.
Anybody who was born in the UK with a UK domicile of origin but has acquired a domicile of choice elsewhere is to be treated as UK domiciled for IHT purposes if at any time they are resident in the UK and have been resident in the UK in at least one of the two previous tax years.
Another Finance Bill is due at the end of November or start of December when the Chancellor delivers the first Autumn Budget.
The above provisions had been previously announced and then dropped due to the election earlier this year. Therefore whilst none of the above is of any surprise, it is at least helpful to have certainty as to when the revised legislation will come into effect. Note that some elements have been backdated.