Many of the changes the Chancellor announced in his first Autumn Statement at the end of November will come into force soon – and some could affect older people for life.
Here’s my assessment…
Less into your pension?
Once you start drawing down your pension fund the limit for what you can pay back into a pension is cut from £40,000 a year to £10,000.
From this April, that will shrink to just £4,000. The Chancellor is worried that some people who have not retired are using the rules to take money out of their pension then put it straight back from their earnings to generate extra tax relief.
You will still be able to do that but the amounts involved will be much less from April. The limit stays at £10,000 this tax year.
Dispelling pension myths
For more than five years the basic state pension has been protected against low inflation and low wage rises by the so-called triple lock.
That ensures the basic pension is raised by at least 2.5% even when earnings or prices rise by less than that. In April, that rule will apply again as the rise in prices and earnings were both below 2.5%, so the basic and the new state pension will rise by 2.5%.
But there have been calls by MPs to end the triple lock and a report by the Government Actuary in 2015 showed it was unaffordable in the long term.
So there will be a review of its cost and an announcement is expected in the autumn of 2018. It is unlikely the triple lock will last beyond 2020.
Is the triple lock on pensions at risk?
The amount of your savings in a bank or building society that is protected is expected to rise from £75,000 to £85,000 on January 30.
The limit was cut only a year ago from £85,000 but the rise back to that level became inevitable after the value of sterling dropped sharply after the EU referendum.
Until we leave the EU the limit is fixed at €100,000. And the new ceiling of £85,000 now reflects the current equivalent in pounds.
Any amount of money is safe in National Savings & Investments and, as savings rates paid by banks and building societies fall, it is expected to continue to offer some of the best rates on savings – such as the 1% paid on its income bond.
How to give your savings a boost
Now you see it…
From June 1, the tax on insurance premiums will rise to 12%. That means the tax will have doubled since October 2015 when it was still 6%.
This hidden tax applies to the premiums for insuring your car, your home, its contents, your pets, your holiday and your health. It invisibly raises £4.5 billion a year and the increase to 12% will raise an extra £840 million a year from April 2018.
…Now you don’t
That amount is identical to the savings for motorists in what Philip Hammond called ‘a tax cut worth £850 million next year’.
He announced a freeze of the duty paid on every litre of petrol and diesel at 57.95p (with VAT that amounts to 69.54p). In fact the annual scheduled rise in the duty has been cancelled every year for seven years.
A cynic might say the planned rise is kept only so the Chancellor can announce he will not do it! At least the lack of a rise in petrol and diesel tax is happening now. Insurance prices will rise from June.
How to control your petrol costs
From April you will be able to keep more of your pension or earnings.
The personal tax allowance will be £11,500 – up by £500 – saving you £112. If you are lucky enough to pay higher-rate tax that limit will rise a lot more – from £43,000 this year to £45,000 in 2017/18, saving you £312 after tax and National Insurance.
…And taketh away
Many older people work beyond pension age, often doing jobs on minimum wage. The rate for that for those over the age of 21 will rise by 30p an hour from £7.20 to £7.50 an hour from April.
But the promise by George Osborne that someone on National Minimum Wage will pay no tax has been scrapped.
Indeed, if you work 40 hours a week on the new £7.50 rate you will pay 82p of that in income tax and National Insurance, leaving you with £6.68. If you work more than 20 hours a week and are under state pension age, you will start paying National Insurance, which will kick in at £157 a week, and income tax will begin once you work 30 hours a week.
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