TaxAug 30 2017

Finance Bill to be reintroduced next week

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Finance Bill to be reintroduced next week
ByMaria Espadinha

The second 2017 Finance Bill will be reintroduced next week, as it is scheduled to be moved in the House of Commons on 6 September, following the summer recess.

A number of changes to tax legislation introduced in the latest Finance Bill in March were dropped after the calling of the general election in May.

Changes in pensions will include a tax break to employers on pension advice, reducing the money purchase annual allowance (MPAA) and cutting the dividend allowance. 

The government confirmed in July that all policies announced pre-election and due to start from April 2017 will be effective on that date.

The Finance Bill will incorporate 34 of these retrospective measures, such as the cut in the MPAA.

This means savers who have accessed their pension from age 55 will see their annual tax-free allowance cut from £10,000 to £4,000 for the 2017/18 tax year.

The MPAA is the amount a person who has already begun drawing on their pension can pay in one year back into their retirement savings without a tax charge applying.

Susan Hill, chartered financial planner at Susan Hill Financial Planning, said backdating this measure was a wrong call from the government.

“People might have been planning this tax year not knowing the MPAA reduction adjustment was being backdated,” she said.

Ms Hill said that “it should be [applied] going forward, and anybody who has done their planning without the reduction should be exempt from it”.

Another retrospective measure to be implemented is an increase the income tax and National Insurance exemption for employer-arranged advice on pensions from £150 to £500.

It will also remove a cliff edge that meant that if an employer spent more than £150 on advice, the whole amount became taxable.

Next week’s Financial Bill will also reintroduce a cut to the annual tax-free allowance on dividend income from £5,000 to £2,000, forecast to generate almost £1bn in extra tax a year by 2020.