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Tony Wickenden: What the Autumn Statement means for savings and investments

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In last week’s article I looked at the changes to pensions announced in the Autumn Statement. This week, continuing my focus on the announcements most relevant to financial planners, I want to look at those affecting savings and investments.

Offshore funds

UK taxpayers invested in offshore reporting funds pay income tax on their share of a fund’s reportable income, and capital gains tax on any gain when shares or units are sold or otherwise disposed of.

The Government intends to bring in legislation to ensure performance fees incurred by such funds, which are calculated by reference to any increase in the fund’s value, are not deductible against reportable income, instead reducing any tax payable on disposable gains. This new treatment, to apply from 6 April, will equalise the tax treatment between onshore and offshore funds.

Authorised investment funds: dividend distributions to corporate investors

The Government intends to modernise the rules on the taxation of dividend distributions to corporate investors in such a way as to allow exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Proposals will be included in draft secondary legislation in early 2017.


It was confirmed the annual subscription limit for the Isa will increase from £15,240 to £20,000 from 6 April. The Junior Isa and Child Trust Fund limit will also increase from £4,080 to £4,128.

National savings

The Government also announced its intention to launch an NS&I bond, with a £3,000 limit and indicative 2.2 per cent gross interest growth rate over a three-year term.

Tax-advantaged venture capital schemes

The Government will include provisions in the Finance Bill 2017 to amend the requirements for the tax-advantaged venture capital schemes (enterprise investment scheme, seed enterprise investment scheme and venture capital trust) to:

1: Clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016.

2: Provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with the EIS provisions, for investments made on or after 6 April 2017.

3: Introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs.

In addition, a consultation will be carried out into options to streamline and prioritise the advance assurance service.

The Government has confirmed it will not introduce flexibility for replacement capital within the tax-advantaged venture capital schemes at this time but will review this over the longer term.

Life assurance policies

HM Revenue & Customs recognised that some who took large part-surrenders from an investment bond when there was little economic gain in the bond, and especially early in the “life” of the bond, could face disproportionately high tax bills.

This is because any chargeable event gain when a part-surrender is made is calculated according to the 5 per cent rule. This means if the amount withdrawn exceeds the cumulative 5 per cent allowances for the bond, a chargeable event gain would arise regardless of whether there was any “real” gain and regardless of the amount.

In order to consider and deal with this inequity, HMRC issued a consultative document in the summer proposing three ways in which the chargeable event rules could be amended. Following the results of the consultation, the Government has announced it will legislate in the Finance Bill 2017 regarding the disproportionate tax charges that can arise from life assurance policy part-surrenders and part-assignments.

Which basis of charge would be adopted was not made clear in the Autumn Statement, although HMRC has stated “this will allow applications to be made to HMRC to have the charge recalculated on a just and reasonable basis”.

Presumably this refers to historical charges; how far back, though, is unclear. Hopefully the legislation will lay out the details. The changes will take effect from 6 April.

Personal portfolio bonds

As announced at Budget 2016, the Government confirmed it will legislate so it has the power to amend by regulations the list of assets life assurance policyholders can invest in without triggering the personal portfolio bonds tax anti-avoidance rules. The changes will take effect on Royal Assent of the Finance Bill 2017.

Offshore structures

The Government intends to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists. It is not certain at this stage what is meant by a “complex structure”. However, it is unlikely this would extend to an offshore bond or fund.

Dividend/savings income

A new system of dividend and savings income taxation was introduced on 6 April. No changes were announced in relation to these tax rules. As a reminder, all individuals receive a tax-free annual dividend allowance of £5,000. Above that, dividends are taxed according to the marginal rate(s) of income tax an individual pays: 7.5 per cent (basic), 32.5 per cent (higher) and 38.1 per cent (additional-rate taxpayer and trustees).

Those with savings income are entitled to a personal savings allowance of £1,000 (basic rate taxpayers) or £500 (higher-rate taxpayers). Additional-rate taxpayers do not qualify for a PSA. Income within the PSA is taxed at a zero rate.

Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn



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There is one comment at the moment, we would love to hear your opinion too.

  1. Money Guidance CIC 12th December 2016 at 1:53 pm

    …and a significant increase to Social Investment Tax Relief.

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