The government will reintroduce measures that were dropped from the 2017 Finance Bill, including backdating some changes to April 2017. Key measures to be reintroduced are reductions to the money purchase annual allowance and pensions advice allowance, changes to non-domiciled tax rules, and recalculation of disproportionate bond gains. Additionally, the dividend allowance will be cut from £5,000 to £2,000 starting in 2018/19, mainly impacting small and medium business owners who take profits as dividends.

1. Government Announces that Finance Bill measures to be resurrected and backdated
The Government has confirmed it will reintroduce all the measures dropped from the Finance Bill 2017 as a result of
the general election. It also intends to stick to the original implementation dates, which would mean some changes
being backdated to 6 April 2017.
The key measures that will be put to Parliament in a new Bill when it returns from its summer recess are:
• Money Purchase Annual Allowance cut
• Pensions Advice Allowance
• Non-Dom rule changes
• Disproportionate bond gain recalculations
• Dividend Allowance cut (From 2018/19)
Money Purchase Annual Allowance cut
The Finance Bill included measures to reduce the Money Purchase Annual Allowance (MPAA) from £10,000 down to
£4,000. This is the restriction that limits what can be paid to money purchase pensions once money purchase benefits
have been flexibly accessed.
However, the Government has confirmed that it will be reintroduced in the autumn Finance Bill and that they intend to
backdate it to the start of the current tax year – so those subject to the allowance should be aware that contributions to
money purchase pensions greater than £4,000 this tax year are likely to incur the annual allowance tax charge.
Recalculation of Disproportionate Bond Gains
A safety net will be put in place for any clients who have created unrealistic chargeable gains on a part surrender of
their investment bonds.
From April 2017 HMRC will allow gains which are wholly disproportionate to the investment performance to be
recalculated on a just and reasonable basis. This would typically arise where a large part surrender in excess of the
5% allowance is made in the early years of the policy.
Changes which will apply from 2018/19
Dividend Allowance Cut
The annual dividend allowance cut from £5,000 to £2,000 will go ahead from April 2018. This will mainly hit small and
medium sized business owners who take their profits as a dividend. Business owners may have to consider the best
way to extract future profits from their business. A cut to the dividend allowance will narrow the gap between salary
and dividends but further strengthens the case for making employer pension contributions.