The UK government’s Finance Bill 2.0, has been published today, bringing to an end the limbo that many international financial advisers and their clients have faced since the UK’s ‘snap’ general election earlier this year.
The UK Treasury said that via the second Finance Bill of 2017 it now has made the tax system fairer by “cracking down on avoidance and evasion”, and will bring in “vital tax revenue” needed for public services.
However predictions of a total ban on pensions ‘cold calling’ have not materialised, but the advice allowance that allows savers to access £500 from their pension savings tax-free up to three times before they reach age 55, in order to pay for regulated financial advice, has been added.
One of the biggest issue for international advisers has been a reduction in the non-dom threshold that was due to come into effect on 6 April 2017.
As reported, the change was put on ice when the surprise UK general election was called. As a result, advisers and non-doms were sent into limbo, as to their clients’ status, leaving planning for the future almost impossible.
The Finance Bill 2.0 has now abolished permanent non-dom status, so that those who have lived here for years – and in some cases for their entire lives – pay tax in the same way as UK residents.
The Bill has also reduced the threshold to 15 years out of the past 20, down from 17.
Other Finance Bill 2.0 highlights
Others measures include:
- new penalties for those who enable the use of tax avoidance schemes that are later defeated by HMRC
- an update on the rules around company interest expenses, to ensure big businesses cannot use excessive interest payments to reduce the amount of tax they pay
- changes to prevent individuals from using artificial schemes to avoid paying the tax they owe on their earnings
- reducing the dividend allowance from £5,000 to £2,000 from April 2018, limiting the difference in tax treatment between those who work through their own company, and those who work as employees or self-employed, whilst ensuring that support for investors is more effectively targeted
- reducing the Money Purchase Annual Allowance from £10,000 to £4,000, limiting the extent to which people can recycle their pension savings to get extra tax relief.
Reacting to the Bill pensions specialists AJ Bell said that the introduction of the advice allowance, a recommendations from the Financial Advice Market Review that aims to improving access to advice following the introduction of the pension freedoms, is welcome.
“There was some speculation that measures to tackle pension scams, including a ban on cold-calling, could be introduced in the Finance Bill,” said Selby. “This always seemed fairly optimistic given the timescales involved and the fact the Government has only committed to protecting savers ‘as soon as Parliamentary time allows’.
“The whole industry now needs to keep the pressure on policymakers to ensure this vital intervention doesn’t get crushed under the debris of the Brexit process.”
As the Finance Bill confirms the reduction of the MPAA to £4,000, Carolyn Jones head of pensions proposition at Fidelity International called this a “disappointing move” that will leave a sour taste in the mouth of consumers and employers alike.
“The dumping of the MPAA changes prior to the general election was always a postponement of the inevitable. However, seeing it retabled – while expected – is not positive.
“The [UK] government had genuine concerns about recycling which it was right to examine carefully however, we have seen there is little evidence of behaviour driven by any dishonesty or urge to play the system. It appears that this change has been introduced to limit behaviours that do not exist and is, therefore, non sensical.
Jones points that the impact of a cut in the MPAA will be felt “in very real terms” by consumers and employers alike and is set to have a negative impact on employers who are already “overburdened with red tape”.
“Younger and older consumers whose positive experience of the freedoms will now be coloured by what they may feel is retrospective barriers to getting their money,” she added
“Consumers’ lack of trust in pensions is largely driven by constant changes to the rules and this constant chipping away around the edges only serves to undermine people’s confidence in long term pensions saving due to the constant moving of goal posts.”