Autumn Budget 2017
The first Autumn Budget for 20 years proved to be a very quiet one from the employee benefits and pensions perspective while containing welcome news for many first-time home buyers.
The headline news was the Chancellor’s announcement of a permanent rise in the price at which a property becomes liable for Stamp Duty Land Tax (SDLT) to £300,000 for first‑time buyers, so as to help young people buy their first home. The relief will not apply for purchases of properties worth over £500,000, but will apply to the first £300,000 for a property costing more that £300,000 but no more than £500,000. 95% of first‑time buyers that pay SDLT should benefit, up to a maximum of £5,000, and 80% of first-time buyers will pay no SDLT at all.
The income tax personal allowance is also to increase to £11,850 in 2018/19 while the point at which higher rate tax becomes payable will rise to £46,350.
Pensions and employee benefits news
The only actual mention of pensions in the Budget speech was when the Chancellor of the Exchequer mentioned that the Government was publishing an ‘Action Plan’ to unlock over £20 billion of new investment in UK scale-up businesses, which would involve (amongst other things) “facilitating pension fund access to long term investments”. We understand that the Government aims to give pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio and that the Pensions Regulator will shortly clarify guidance on investments with long-term investment horizons.
Other items relevant to pensions and tax included:
Lifetime allowance – This will increase in line with CPI, rising to £1,030,000 from the start of the 2018/19 tax year.
New State Pension – The full new single-tier pension will be increased by the triple lock, rising by £4.80 per week.
Pre-2016 State Pension – The basic State Pension will be increased by the triple lock with a rise in April 2018 of 3%, a cash increase of £3.65 per week for the full basic State Pension. The poorest pensioners will also benefit from the triple lock through an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension.
Life assurance and overseas pension schemes – From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.
Pensions tax registration – As announced previously, the Government will legislate in the next Finance Bill to introduce powers to register and de-register master trust pension schemes and schemes for dormant companies.
National Insurance Contributions (NICs) reforms – As announced previously, there will be a delay to April 2019 in implementing a series of NICs policies, including the abolition of Class 2 NICs and treatment of termination payments.
Matters relevant to broader employee benefits included:
Individual Savings Account (ISA) annual subscription limits - the ISA limit for 2018/19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018/19 will be uprated in line with CPI to £4,260.
Electric cars - there will be no benefits-in-kind tax charge on electricity that employers provide to charge employees’ electric vehicles from April 2018.
Diesel cars - a Vehicle Excise Duty (VED) supplement will apply to new diesel cars first registered from 1 April 2018, so that their First-Year Rate will be calculated as if they were in the VED band above. This will not apply to next-generation clean diesels – those which are certifed as meeting emissions limits in real driving conditions, known as Real Driving Emissions Step 2 (RDE2) standards. There will also be a rise in the existing Company Car Tax diesel supplement from 3% to 4%, with effect from 6 April 2018. This will also apply only to diesel cars which do not meet the Real Driving Emissions Step 2 (RDE2) standards.
National Living Wage (NLW) and National Minimum Wage (NMW)
The levels of these wages are highly relevant to employee benefit arrangements where salary sacrifice of pension contributions is practiced since any sacrifice must not reduce a worker’s earnings below the relevant NLW and NMW. Following the recommendations of the Low Pay Commission, the Government will increase the NLW by 4.4% from £7.50 to £7.83 from April 2018.
The Government also accepts all of the Commission’s recommendations for the other NMW rates to apply from April 2018 – the largest increase in youth rates in 10 years. This will mean that the NMW for 21 to 24 year olds will increase by 4.7% from £7.05 to £7.38 per hour, for 18 to 20 year olds it will increase by 5.4% from £5.60 to £5.90 per hour and the rate for apprentices will increase by 5.7% from £3.50 to £3.70 per hour.
With over £2 trillion in UK pension funds, small changes in investment have the potential to transform the supply of capital to innovative firms.
Despite much prior speculation, especially in connection with pension tax relief, this was a quiet Budget and given the scale of recent changes in the pensions and employee benefits industry this will be broadly welcomed.