Changes to dividends, savings and pensions
His change will also impact on savings and he increased the amount that can be locked away in an ISA.
The chancellor will lamp down on company directors who choose to pay themselves with dividends rather than drawing a higher salary from their company.
Many small traders set up businesses by forming a company and paying themselves through dividends as well as a salary.
He has reduced the dividend allowance £5,000, announced by the previous chancellor, George Osborne, in 2015, to £2,000 from April 2018.
A basic rate tax payer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.
The VAT registration threshold rises £2,000 to £85,000 from April 1 2017.
The cut in dividends allowance will also impact those with investments held outside an ISA.
The government calculates that the reduction in the allowance for investors would not affect 80% of UK investors, adding that the ISA allowance would rise to £20,000 for both cash and stocks and shares products from April.
The Chancellor announced the interest rate on the new National Savings and Investment bond will be 2.2%. Available from April, it will allow anyone to save up to £3,000 inside the three-year government backed savings bond.
While the 2.2% rate did not impress all savings experts it is higher than the vast majority of cash savings products currently available in the UK according to comparison site Moneyfacts and NS&I products are historically very popular with risk adverse savers because of the government guarantee.
As of April 6, 2017 those looking to “recycle” some of the money in their pension pot will find this option severely curtailed. Since pension freedom’s were introduced in 2015 people have been able to draw money from a pension while retaining the right to top up that pension at a later date.
The Chancellor has acted to rein in what was a well-known abuse of this “freedom”” used by some as a way of boosting pension savings by “double-dipping” pension relief.
In short people would take money from one pension and place it in another, claiming a second set of tax relief when they did. Mr Hammond has reduced the Money Purchase Annual Allowance by £6,000 to £4,000.
Andrew Tully, pensions technical director at financial advice firm Retirement Advantage said: “This restriction to the Money Purchase Annual Allowance is a significant restriction [to pension freedom’s].”
The chancellor also introduced a 25% charge for those looking to transfer their pension overseas as of midnight.
The Treasury justified the introduction of the charge by saying it wishes to stamp down on wealthy pension savers – who have built up a sizable pension pot – avoid paying their fair share of UK income tax once they begin drawing an income from their pot by shifting their pot to another country with a lower income tax regime than the UK.
David Hartles, private client principal at chartered accountants HW Fisher & Company said: “This [25% charge] has the ability to affect up to a quarter of a billion pounds of pension savings leaving the UK.”
AirBnB property owners face possibility of higher tax bills
The Treasury plans to consult on removing the Rent-a-room tax relief from those who rent out rooms in their homes on a short term basis.
As it stands the Rent-a-room relief allows property owners to earn £7,500 tax free from renting out a room in their home.
However, the scheme was established to encourage long tem provision of rental accommodation, and the government will now consult on whether the relief should be amended to ensure it remains true to this goal.