Pensions, savings and investments
Individual savings account (ISA) subscription limits
The ISA annual subscription limit for 2018/19 will remain unchanged at £20,000 and the lifetime ISA (LISA) annual subscription limit will stay at £4,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2018/19 will rise to £4,260.
Lifetime allowance for pensions
The lifetime allowance for pension savings will increase to £1.03 million for 2018/19. There is no change to the annual allowance.
The lifetime allowance will rise by £30,000 from 6 April 2018. If you plan to draw from your pensions and already have funds exceeding the current £1m lifetime allowance limit, you may want to wait before taking your pension benefits.
Life assurance and overseas pension schemes
From 6 April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be extended to cover policies where an employee nominates an individual or registered charity to be their beneficiary.
Venture capital trusts (VCT) and enterprise investment schemes (EIS)
A range of changes were announced to VCTs, EISs and seed enterprise investment schemes (SEIS):
- Risk to capital condition Legislation in the Finance Bill 2017-18 will ensure that VCTs, EISs and SEISs are targeted at growth investments. Relief under the schemes will be focused on companies where there is a real risk to the capital being invested, and will exclude investments in companies and arrangements intended to provide capital preservation. The changes will have effect from Royal Assent.
- Increased limits for investments in knowledge-intensive companies The maximum an individual may invest under the EIS in a tax year will double to £2 million, where an amount of over £1 million is invested in one or more knowledge-intensive companies. The annual investment limit for knowledge-intensive companies receiving investments under the EIS, and from VCTs, will also double to £10 million, but the lifetime limit will remain at £20 million. Knowledge-intensive companies will be allowed to use the date when their annual turnover first exceeds £200,000 to determine the start of the initial investing period, instead of the date of first commercial sale. The changes will have effect from 6 April 2018, subject to state aid rules.
- Relevant investments Current rules exclude certain investments made by VCTs and EISs before 2012 from counting towards the lifetime funding limits for investee companies. These provisions will be scrapped from 1 December 2017, subject to state aid rules.
- Effect of anti-abuse provisions on commercial mergers of VCTs Legislation in the Finance Bill 2017-18 will limit the application of an anti-abuse rule relating to mergers of VCTs. This rule will no longer apply if VCTs merge later than two years after a subscription, or do so only for commercial reasons. The change will have effect for VCT subscriptions made on or after 6 April 2014, subject to state aid rules.
- Other VCT reforms Several other changes will be made to move VCTs towards higher risk investments. For example, the proportion of VCT funds that must be held in qualifying holdings will rise from 70% to 80%; and 30% of the funds raised in an accounting period must be invested in qualifying holdings within 12 months of the end of the accounting period.
Master trust tax registration
From 6 April 2018, HMRC will have powers to register and deregister master trust pension schemes and pension schemes for dormant companies.
The dividend allowance will be cut to £2,000 from 2018/19. Take advantage of the increased ISA allowance of £20,000 in the new tax year.