The Chancellor's first Spring Statement
Mr Hammond made clear some while ago that he wanted his Spring Statement to be a short financial briefing rather than a mini-Budget, complete with rabbit-out-of-hat announcements.
Although his speech ran to 25 minutes, rather than the 15-20 that had been promised, the Chancellor stuck to a no-frills script.
April will still see a raft of tax and other changes, some of which date back to the pre-election 2017 Spring Budget.
However, the Chancellor did not introduce any new tax measures in his Spring Statement, although he did announce no less than 13 consultations.
Go to Martin Aitken & Co's website for a full overview of the Spring Statement 2018 and tax changes for the new tax year 2018/19.
Pensions, savings and investments
Inheritance tax (IHT)
The residence nil rate band, which was introduced in the current tax year, will rise by £25,000 to £125,000 in 2018/19. The main nil rate band will remain at £325,000 at the level set in 2009.
In the longer term, changes may be coming to IHT. In January 2018, Mr Hammond asked the Office of Tax Simplification (OTS) to, ‘carry out a review of the IHT regime’. The OTS will focus on simplification of the ‘particularly complex’ system and will issue its report in time for the Autumn Budget.
Auto-enrolment contributions increase
As of 6 April 2018, employees and employers are required to increase the amount of contributions into their automatic enrolment pension. >more
Pensions – the lifetime allowance
The lifetime allowance, which sets the effective maximum tax-efficient value of pension benefits, will rise in line with inflation from £1 million to £1.03 million for 2018/19. The lifetime allowance has been on a downward path since 2012, when it was cut from £1.8 million to £1.5 million. Two further cuts followed in 2014 and 2016. There is no corresponding increase to the annual allowance, which remains at a maximum of £40,000.
Payments in lieu of notice
All payments in lieu of notice (PILONs), whether or not contractual, will subject to income tax and NICs in 2018/19. These will include payments made in circumstances where employees do not work their notice for any reason. Tax and NICs will be charged on any payment that corresponds to the earnings they would have received if they had worked their notice.
The £30,000 exemption will continue to apply to tribunal awards for unfair dismissal, redundancy payments and contractual payments in lieu of redundancy.
The first £30,000 of a non-contractual termination payment will be tax-free. Any balance over £30,000 will be subject to income tax. From 2019/20, a year later than originally planned, employer NICs, but not employee NICs, will also be applied to taxable payments in excess of £30,000.
Venture capital trusts and enterprise investment schemes
Last year the government undertook a ‘patient capital’ review, which was followed by a raft of revisions to venture capital schemes announced in November’s Budget. The changes are intended to increase the emphasis on investment for growth and reduce the scope for structuring schemes to target capital preservation.
From 6 April 2018, the maximum EIS subscription that can qualify for 30% income tax relief will double to £2 million, subject to at least £1 million being invested in knowledge-intensive companies.
If you have any questions about the summary's contents or how any aspect of your tax and financial planning may be affected by the Spring Statement 2018, please get in touch with your usual Martin Aitken & Co or Martin Aitken Financial Services Ltd contact to discuss. We will be pleased to hear from you.
This summary has been prepared very rapidly and is for general information only. All statements within this document are based on our understanding of the changes within the 13 March Spring Statement.
You are recommended to seek professional advice before taking any action on the basis of the contents of this summary. Publication date: 14 March 2018