Dividend Allowance and Money Purchase Annual Allowance Cuts on Hold

April 27, 2017

Since writing this post the Government has confirmed it will reintroduce all the measures dropped from the Finance Bill 2017. It also intends to stick to the original implementation dates.

 

As a result of the early general election and with Parliament due to be dissolved on 3rd May, there is now insufficient time to get the full Finance Bill on to the statute book. A number of measures have been removed from the current Bill. The two measures most relevant to our clients are:

 

Dividend Allowance Cut

 

Currently every individual is able to earn dividends of £5,000 each year tax free, this allowance was due to be cut from £5,000 to £2,000 from April 2018 but it is no longer part of the current Finance Bill.  This would be particularly relevant for small and medium sized business owners who take their profits as a dividend.

 

Reduced Money Purchase Annual Allowance (MPAA)

 

The MPAA, which restricts pension contributions for those who have accessed defined contribution pensions under the new pension flexibilities, was due to be cut from £10,000 to £4,000 this tax year. This will no longer take place.

 

While these changes no longer form part of the current Finance Bill they will be reconsidered once a new Parliament commences, meaning they may be delayed rather than dropped altogether.

 

Since writing this post the Government has confirmed it will reintroduce all the measures dropped from the Finance Bill 2017. It also intends to stick to the original implementation dates.

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