The majority of the Chancellor’s announcements made today related to a £23bn infrastructure and innovation fund to be spent over the next 5 years – good news for our clients in the TMT and Life Sciences sectors. The tax announcements, for the most part, simply confirmed measures that had already been announced in March.
The headline points are:
- The main rate of corporation tax (currently 20%) will be reduced to 17% by 2020.
- The tax deductibility of interest costs will be restricted for large companies (those that have more than £2m of interest costs per year), which means that some interest will have to be financed out of post-tax profits rather than pre-tax profits. This is to prevent the kind of tax planning that allowed multinationals to avoid tax in the UK even though they have significant sales turnover here.
- The ability of large companies to set losses in previous years against profits in future years will be restricted. This is also aimed at preventing the kind of tax planning multinationals have engaged in to shelter profits from tax in the UK.
- Insurance Premium Tax will increase from 10% to 12% in June 2017.
- No increase in the income tax rates.
- The individual tax-free personal allowance will increase to £12,500 by 2020.
- Certain salary sacrifice arrangements will lose their income tax and national insurance savings (this will not affect pension contributions, childcare and cycle to work scheme).
- Individuals who are resident, but not domiciled in the UK (and therefore have special tax rules applying to them), will be deemed to be domiciled in the UK once they have been here for 15 years.
The biggest news from the Autumn Statement was that there will be no more Autumn Statements. From 2018 the Budget will be in the Autumn with no other ‘major fiscal events’ for the rest of the year.