Savings and Pensions
From 6 April 2017, the ISA investment limit rises from £15,240 to £20,000 per year. The limit for Junior ISAs and Child Trust Funds increases from £4,080 to £4,128.
From the same date, the new Lifetime ISA (LISA) is introduced: taxpayers aged between 18 and 40 may open an account and invest up to £4,000 each year in an ISA, qualifying for a 25% Government bonus on amounts invested up to the age of 50. This benefit is retained as long as the money is either put towards a first home costing up to £450,000, or kept in the account until reaching age 60 or being diagnosed with a terminal illness. If the money is withdrawn in other circumstances, the bonus will be clawed back with an additional 5% charge. The £4,000 is part of the general ISA limit of £20,000, not additional to it. An existing ‘Help to Buy’ ISA account can be transferred into a LISA during 2017/18 without affecting the limits.
Pension contributions (Table B)
The limit on contributions to tax-advantaged pension schemes remains £40,000 per year for those with income up to £150,000 (£110,000 if the pension contribution is paid in addition to salary by an employer). The limit is tapered away as income increases above £150,000 to £10,000 when income reaches £210,000.
The pension reforms introduced from April 2015 allow people over 55 to access their pension pots. Those who have done so and taken ‘flexible income drawdown’ – more than the tax-free 25% of the pot – are subject to a lower annual limit if they decide to make further pension contributions. This has been £10,000 for the first two years of the new system, but falls to £4,000 from 6 April 2017.
Tax-advantaged venture capital schemes
The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) offer a range of tax advantages for investment in companies, but are subject to a bewildering range of conditions and rules. As announced in November 2016, the requirements are to be amended to clarify the rules on share conversions and to provide additional flexibility for follow-on investments by VCTs. HMRC has also consulted on ways to streamline and prioritise the advance assurance service to help genuine investors know that they will qualify for the relief.
Life insurance policies
Single premium life insurance policies are generally charged to Income Tax when they are encashed at a profit, rather than Capital Gains Tax. A tax case highlighted an anomaly in the rules for partial surrenders, which could create a tax charge out of all proportion to the real underlying gain in the value of the whole policy. From Royal Assent to the Finance Act 2017, it will be possible for people affected by these anomalies to apply for the gain to be recalculated on a just and reasonable basis.