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Finance Bill receives Royal Assent
The Finance Bill 2016 received Royal Assent on 15 September 2016 following agreement by both Houses on the text of the Bill. The Bill is now an Act of Parliament (law) known as Finance Act 2016. The Bill contains the legislation for many of the tax measures that had been announced by the Government at Budget 2016, Autumn Statement 2015 and Summer Budget 2015.
This includes an increase in the personal tax allowance to £11,500 and the income tax higher-rate band to £45,000 for 2017-18. The Act also brings about the reduction in the Capital Gains Tax (CGT) rates for standard rate taxpayers to 10% (from 18%) and for higher rate taxpayers to 20% (from 28%) that came into effect on 6 April 2016. The new rates do not apply to the sale of residential property that does not qualify for private residence relief. CGT due on the sale of residential property is effectively taxed at the old CGT rates.
The Finance Act also legislates for the new lower Corporation Tax rate of 17% from 2020 as well as the introduction of the new apprenticeship levy which will commence in England from 6 April 2017. There are many more measures included within the Finance Act which runs to an astounding 648 pages!
Lifetime ISA launch
The new Lifetime ISA, that will help those aged between 18 and 40 to save for a new home or for their retirement, is expected to be available from April 2017. The legislation necessary to bring about the introduction of this new flexible savings plan is currently progressing through the various parliamentary stages.
The new scheme will see the government provide a bonus of 25% on yearly savings of up to £4,000 until the savers 50th birthday. Any savings put in before the Lifetime ISA holders 50th Birthday will benefit from the 25% bonus. This could mean an extra £1,000 for every £4,000 saved annually from the age of 18 to 50. In total this could see savers who invest the maximum contributions of £128,000 receive a maximum government bonus of £32,000.
The savings and bonus can be used to purchase a first home worth up to £450,000 anywhere in the UK or to save towards retirement. Savers will be able to withdraw the savings tax-free after their 60th birthday. The funds can remain invested after age 60 and any interest and investment growth will be tax-free. The money can be withdrawn earlier (for something other than the purchase of a first home) but the government bonus will be lost and a 5% penalty will be levied.
Any contributions to a Lifetime ISA will be part of the overall ISA annual contribution limit. This limit will increase to £20,000 from April 2017. The government bonus will be paid annually at the end of the tax year.
EU Payments Account Directive
The EU Payments Account Directive more commonly known as PAD sets a European wide standard on the services provided to EU residents by banks. The directive is meant to ensure that services, including an account switching service, the right of access to a basic bank account for those who are legally resident in the EU and clear and transparent information on fees and charges, are available across EU banks.
The government is required to have implemented PAD in the United Kingdom by 18 September 2016 and a new paper published by HMRC provides information on how the UK has met its responsibilities under the directive. This includes making sure fees charged by banks are transparent and ensuring the availability in the UK of a free seven day current account switch service known as the Current Account Switch Service (CASS).
In addition, since 1 January 2016, the largest banks in the country also offer basic bank accounts to over 1 million people in the UK. These accounts will help people who do not have a bank account, are ineligible for a standard current account or who can’t use their existing account due to financial difficulty. There are estimated to be over 1 million people in the UK without a bank account.
The paper also confirms that until Brexit take place, the government will continue to negotiate, implement and apply EU legislation as and when required.