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Guide to Spring Budget 2017Budget tax reform a hint of changes to come
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Under the changes, the first rate fee of £215 (or £155 if using a solicitor) will change to one tiered based on assets. Lower value estates are exempt from any charge, but any estates over £50,000 will increase.
Estates with assets of more than £1m will have to pay probate fees between £8,000 and £20,000 - and given the average house price is more than £325,000, this could affect many people in Britain.
Gordon Andrews, financial planning expert for Old Mutual Wealth, comments: "At its crudest, one could argue this is yet another stealth tax being levied by the government, which could add up to 1 per cent in fees on the value of an estate."
Other allowances/cuts
The chancellor confirmed that the personal tax allowances would rise from £11,500 in 2017/2018 to its target level of £12,500 by 2020.
However, former pensions minister Steve Webb, director of policy at Royal London, comments: "Half a million low-paid workers could end up missing out on tax relief on their workplace pension contributions."
This is because the earnings trigger for automatic enrolment is £10,000, but this is less than the planned income tax threshold. When the rise to £12,500 happens, Mr Webb warned that up to half a million people could be caught in the trap unless their workplace pension scheme taxes the money at source, rather than using a 'net pay arrangement system'.
He explains: "If a low-paid worker wants to put £100 into a pension, it will cost them £80 if they get standard rate tax relief, but the full £100 if they do not.
"This all depends on the lottery of whether their employer has chosen a scheme which offers tax relief at source, rather than using the net pay arrangement."
Elsewhere in the Budget, the chancellor confirmed the annual allowance for Isas would rise to £20,000, as first mooted by his predecessor, George Osborne, and confirmed the Lifetime Isa launch this April, whereby individuals saving £4,000 a year can earn up to £1,000 bonus a year on these contributions.
The government is also set to amend the master trust pension scheme tax registration process.
For a quick snapshot of the various allowance increases, here's a handy table:
| Tax | Changes in 2017 Budget | Changes in 2016 Autumn Statement | Changes in 2016 Budget |
| Income tax | Government continues with plans to increase personal allowance "by more than inflation" in 2017/2018. Personal allowance confirmed it will rise to £11,500, with a £2,000 increase to higher rate threshold. NEW: Government introduces a £3,000 reduction in the tax-free dividend allowance from £5,000 to £2,000. | Gov't pledges to meet commitment to raising income tax personal allowance to £12,500 and the higher threshold to £50,000 by end of this parliament. Once it reaches £12,500, it will rise in line with CPI. | Personal allowance to rise to £11,500 in 2017/2018. Higher rate threshold will rise by £2,000 to £45,000 in 2017/18. |
| Pension allowance | No changes to MPPA proposals to reduce it from £10,000 to £4,000. No change to the LTA. Green Paper on Social Care promised. Master Trusts will see their tax registration process amended to align with the Pension Regulator's new authorisation and supervision regime. | No changes announced to pensions allowance. However, Money Purchase Annual Allowance will be reduced to £4,000 from April 2017. From 6 April 2018, the government still intends to index the standard Lifetime Allowance annually in line with CPI. | Lifetime Isa introduced. LTA for most people is £1m in the tax year 2016-17. |
| Capital gains tax | No mention of changes to CGT, despite calls from the buy-to-let industry asking for a least a tapered reduction in CGT, on properties owned for 10+ years. | Tax advantages linked to employee shareholder status will be abolished for arrangements entered into on, or after, December 2016. | From 6 April 2016, higher rate of CGT will be reduced from 28% to 20%. The basic rate of CGT will be reduced from 18% to 10%. Entrepreneurs’ relief will be extended to long-term investors in unlisted companies. This will provide 10% rate of CGT for gains on newly issued shares in unlisted companies bought on or after 17 March 2016. |
| Bank levy | No changes | Bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. | No changes |
| Inheritance tax | Still no movement on the £325,000 threshold for IHT | Gov't confirms that from April 2017, IHT will be charged on UK residential property when held indirectly through an offshore structure | Government will legislate to charge IHT on all UK residential property indirectly held through an offshore structure, from 6 April 2017. |
| Corporation tax | Gov't pledges to uphold the 17 per cent cut and reduce burden of business rates by £6.7bn over next five years. | Rate of corporation tax will be cut to 17 per cent by 2020. | |
| Tax on savings interest | Gov't commits to a R&D tax review with the publication of an Industrial Strategy Green Paper to drive up the level of private investment in science, research and innovation. No change - but beware the £3,000 reduction in Dividend Tax. | Isa allowance rises will be as outlined by George Osborne in his Spring Budget in 2016. Gov't is to equalise tax treatment between offshore and onshore funds. | Isa allowance to rise from £15,240 to £20,000 in April 2017. Any adult under 40 can open a new Lifetime Isa, saving up to £4,000 each year with a £1,000 government bonus. Tax rules will be changed on Oeics, authorised unit trusts, investment trusts and peer to peer loans. This means income tax deductions on interest will no longer be payable from April 2017. |
| National Insurance Contribution | Class 2 Nics abolition has been confirmed by gov't. No changes to Class 4 Nics after government u-turn on 15 March. | Proposals to end class 2 Nics | |
There was some respite in business rates and property tax rates, but as Mr Meakin comments: "As expected the chancellor announced some respite for small businesses who are due to be hit with the highest rises in business rates, with a specific protection for pubs.
"However, the measures to lighten the load are being received as something of a sticking plaster rather than a fundamental immediate reform."
Insurance premium tax
