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Budget 2017: LGT Vestra’s key points

29 March 2017

Graeme Stenson, Wealth Planner

Key measures announced today:

Dividend allowance

The tax free allowance will reduce from £5,000 to £2,000 from April 2018.

This is allegedly targeted at those who take dividends from their own company rather than remuneration. In fact, it is very dramatic and will affect all investors in receipt of dividend income. For an additional rate taxpayer the reduction will result in additional tax of £1,143 compared to 2016/17; hence the forecast of £870m additional government revenue from this change in 2019/20.

National insurance – Self employed

Class 2 contributions (currently £2.80 per week) will be abolished from April 2018.

Class 4 contributions (currently payable on self employed earnings in band £8,060 to £43,000) will increase from 9% to 10% in April 2018 and to 11% in 2019.

Rent a room relief

The government will consult on changes to redesign rent-a-room relief to ensure that it is better targeted to support longer-term lettings.

Qualifying Recognised Overseas Pension Schemes (QROPs)

A tax charge of 25% will be imposed on the amount transferred to an overseas scheme. This charge is targeted at those seeking to reduce the tax payable by moving the pension wealth to another jurisdiction. There will be an exception allowing transfers to be made free of this taxwhere people have a genuine need to transfer their pension, including where the individual and the pension are both located within the European Economic Area. This is effective for quotations after today.

Avoidance

New legislation will ensure that promoters of Tax Avoidance Schemes cannot circumvent the need to register a structure with HMRC by placing a person between themselves and the promoting business.

NS&I Investment Bond

This will offer a 2.2% per annum rate over a term of 3 years and will be available for 12 months from April 2017. Open to everyone over the age of 16 subject to a maximum investment limit of £3,000.

Withholding tax on interest

The government will introduce an exemption from withholding tax for interest on debt traded on a Multilateral Trading Facility.

Corporation Tax

As announced in the Autumn Statement 2016, the rate will be cut from 20% to 19% from April 2017 and again to 17% from April 2020.