The latest public finances data from the Office for National Statistics show the Chancellor to be comfortably on course to meet the upwardly revised 2016/17 deficit figure announced alongside the Autumn Statement.

The Office for National Statistics (ONS) has just published the latest statistics on public sector finances, covering the first ten months of 2016/17. The update includes figures for January, a month when the Treasury coffers usually enjoy a surplus of income over expenditure.  The next update will not arrive until March 21, almost a fortnight after the Budget, so today’s figures are the latest the Treasury and the Office for Budget Responsibility (OBR) have to work from for their 2017/18 projections.

The figures will be a relief for the OBR and Mr Hammond, especially after last November’s Autumn Statement in which the OBR increased its projection for 2016/17 government borrowing from £55.5bn (made in pre-referendum March) to £68.2bn. The ONS numbers take some interpretation, as it has introduced “a new methodology for the recording of Corporation Tax and Bank Corporation Tax Surcharge receipts” which smooths receipts of these taxes in a different way:

  • In January 2017, the public-sector finances were in surplus to the tune of £9.4bn, an increase of £0.3bn over the (revised) January 2016 figure.


  • According to Reuters, the market had been expecting a figure of close to £14bn, but that was before the revised treatment of corporation tax is taken into account. Had this revision not occurred, the reported figure would have been £15.2bn, the highest recorded in the last 20 years.


  • Self-assessed Income Tax and Capital Gains Tax receipts increased by £2.0bn to £19.8bn in January 2017 compared with January 2016, making it a record month since monthly recording of self-assessed tax receipts started in April 1999. There was a boost in 2017 from tax on accelerated dividend payments made in 2015/16 to avoid the higher tax rates following the introduction of the dividend allowance. However, some caution in comparisons is needed because last year 31 January fell on a Sunday. As the ONS says, “The proportion of self-assessed income tax recorded in January and February can vary year-on-year and it is therefore advisable to consider data for the two months (January and February) together.”


  • Two months from the end of the financial year, the ONS says net borrowing has reached £49.3bn, 21.6% less than the (revised) £62.9bn at the same stage in 2015/16.


  • To meet the £68.2bn borrowing forecast for 2016/17 most recently given by the Office for Budget Responsibility (OBR), net borrowing must total just under £19bn over the next two months. For 2015/16, the final two months saw net borrowing of £8.8bn. On a simple extrapolation of the ten-month figures – always a dangerous act – this financial year will end with a deficit of a little over £56bn, curiously close to the target set by Mr Osborne in March 2016…


These figures point to Mr Hammond having a little wriggle room on 8 March, although not enough to meet all the cries for extra cash which are now emerging. The smaller deficit figures need to be put into another context: total public sector net debt (excluding public sector banks and the Bank of England) is now £1,589.2bn, 80.5% of GDP.


The Lifetime ISA becomes available from April 2017 but due to complexities in the rules savers could lose their bonus.

When the Lifetime ISA (LISA) is launched in April 2017, savers will be able to subscribe up to £4,000 a year and receive a government bonus of 25% on the money.

The LISA allows individuals to save for retirement or to buy their first home. Further details on the LISA can be found here.

For the first year only the government bonus will be paid annually (i.e. at the end of the first year) but will be paid monthly thereafter.

However, for those who invest the maximum of £4,000 in the first year and then buy a house before that 12-month bonus arrives, they will lose the £1,000 bonus.

In addition, it should be noted that existing savers who have a help-to-buy ISA are being encouraged to transfer that money into a LISA.

In the first year only a transfer from a help-to-buy ISA does not count towards the £4,000 LISA subscription limit. However, if a transfer does take place and the saver buys a property in that first 12 months, according to the Treasury, they could also lose out on the help-to-buy bonus which could be as much as £900 if the maximum of £3,600 has been saved – i.e. if someone opened the account in March 2016 with the first month’s limit of £1,200 plus they added £200 in April 2016 and in each month thereafter to March 2017.

While the saver could go back to their help-to-buy ISA provider to request the bonus this may not be as simple as it sounds and is likely to cause administrative complexities.

While the introduction of these new savings products had initially been welcomed, the detailed rules are in fact quite complicated and could result in costly consequences for savers. With this in mind, for the LISA it may still be worth opening the account but just being aware that a bonus may not be earned in the first year if an early house purchase takes place. And, for the help-to-buy ISA, it may be advisable for individuals to wait until near the end of the tax year before they transfer it to a LISA.


UK government confirms that probate fees in England and Wales will change to a banded system in May 2017.

The UK government has confirmed that probate fees in England and Wales will change to a banded system in May 2017. In essence the fees will increase with the value of the estate thereby replacing the current flat fees.

The cost of probate fees increased significantly in April 2014, when the cost of an application through a solicitor rose from £45 to £155, and the cost of a personal application increased to £215.

The proposal to link probate fees to the value of the estate was published in February 2016.  However, it attracted overwhelming opposition and according to the Ministry of Justice’s consultation response, only 63 out of 829 respondents agreed with linking probate fees to the value of the estate, and 695 disagreed. Most responses to the consultation considered that the proposed fees were too high, and, because of this would effectively constitute a form of taxation.

It is said that no fee will be payable for estates worth less than £50,000, but the charges will increase rapidly beyond that threshold, rising to a maximum of £20,000 for estates above £2 million.

The full extent of the increase is shown in the table below: 

Value of estate (before inheritance tax)


Existing fee*


New fee


Up to 5,000 Nil Nil
5,001 – 50,000 155/215 Nil
50,001 – 300,000 155/215 300
300,001 – 500,000 155/215 1,000
500,001 – 1,000,000 155/215 4,000
1,000,001 – 1,600,000 155/215 8,000
1,600,001 – 2,000,000 155/215 12,000
Over 2,000,0000 155/215 20,000


*£155 for applications via a solicitor, £215 for personal applications
The Ministry of Justice’s response to the original consultation paper notes that it expects “these reforms to probate fees to deliver around £300 million in additional income per year – a substantial contribution to the running costs of HMCTS [Her Majesty’s Courts and Tribunals Service].” An earlier attempt to increase HMCTS funding by levying a flat non-means-tested fee on all trail defendants was withdrawn in late 2015 after a public outcry. The hike in probate fees is unlikely to provoke such a response, not least because 58% of estates fall within the £50,000 threshold and will thus face no fee.

The increased probate fees – effectively 1% on a £2m estate – are a de facto tax (which is not IHT relievable, to add insult to injury). Only 13 out of 813 respondents to the consultation agreed with the scale, but with more than a hint of the Kafkaesque, the response document put their minority views first. Hypothecating taxes (real or disguised) to specific areas of expenditure is one of the ways in which the government is heading in its search for extra income.

The triple lock on income tax rates, Class 1 NICs and VAT (see our earlier bulletin) together with a commitment to cut corporation tax have effectively limited the Chancellor’s room for manoeuvre: that quartet of taxes accounts for two thirds of the Exchequer’s total income. Of course, there is still scope to adjust these taxes, witness the attack on buy-to-let income and the annual allowance cuts, but major-revenue raising is difficult if the rates are unmovable.

Last year’s Budget saw Mr Osborne add 0.5% to Insurance Premium Tax (IPT) to help fund flood defence costs, following on from a 3.5% (non-earmarked) increase in July 2015. In November Mr Hammond added another unspecific 2% from 1 June 2017, worth about £850m a year, and safely outside the tax triple lock. IPT will thus have doubled in 19 months.

This time around there have been rumours of a 10% increase in the IHT rate (unlocked, remember) to help meet the cost of social scare. That would raise about £1.2bn a year. In practice the government has already played the social care hypothecated tax increase card a couple of times, firstly allowing to local authorities to raise council tax by 2% a year to cover rising care costs.  Subsequently, the government decided to permit part of the precept (aka increase) to be brought forward, so that 3% increases became possible (i.e. almost certain) for 2017 and 2018. Passing the hypothecated buck to local authorities has the added advantage that the bigger bill does not arrive from central government.

The tax triple lock was a pre-election, pre-referendum pledge which now looks as foolish as many economists suggested when it was first mooted. However, politics means that Mr Hammond is unlikely to revoke his predecessor’s promise. Thus, on Wednesday look out for more hypothecated taxes. They also will not impress the economists who say that taxes and expenditure are often not in sync and it is better to leave matters to general taxation.


The Pension Protection Fund, following the publication of provisional rules in December 2016, has now published a consultation on additional rules for eligible schemes which cease to have a substantive employer after a restructuring of their pension arrangements. 

The 2017/18 Consultation on a levy rule for schemes without a substantive sponsor has been published by the PPF, the deadline for comments is 5pm on 6 March 2017 and the PPF will publish finalised rules by 31 March 2017.

Comments should be sent to

This consultation considers how to charge a levy to a scheme that, following separation from its sponsoring employer, continues to run on without a substantive sponsor under the terms of an ongoing governance arrangement.

The PPF state “In our view such a scheme would present a different risk to our levy payers from that posed by other schemes: in the absence of a genuine sponsor, the primary risk to which PPF levy payers would be exposed is the risk of failure in the scheme’s investment strategy. A direct consequence is that our standard approach to calculating levies – a key element of which is an assessment of the likelihood of a sponsoring employer becoming insolvent and so triggering a claim on the PPF – is not suitable for such schemes. For a scheme without a substantive sponsor a claim on the PPF requires only a deterioration of the scheme’s funding position.”

The proposals aim to achieve this by basing the charging methodology on a commonly used pricing model for assessing put options, as the PPF view this as the financial instrument most closely comparable to the risk presented to the PPF’s levy payers by a scheme with no substantive sponsor. They believe this can be seen to provide a fair price, because it is an approach that willing buyers and sellers of the financial product use for their transactions.

A second key principle for us is that a scheme set up to operate without a substantive sponsor will always pose a higher risk than an otherwise identical scheme with a continuing sponsor, however weak. So the levy calculation will always charge as a minimum the amount that would be due under the standard rules (assuming the scheme was sponsored by the weakest possible employer).


The FCA have published their latest Data Bulletin which includes insights from the customer contact centre as well as the latest trends in the retirement income market. 

The FCA have published their latest Data Bulletin which includes insights from the customer contact centre as well as the latest trends in the retirement income market.

Insights from the FCA Consumer Contact Centre 

The data in this section of the Bulletin looks at the contact made with the contact centre over the twelve-month period from 1 December 2015 to 30 November 2016.

The bulletin initially looks at an overview of the enquiries received, with the majority (36%) being about the status of firms and regulation, followed by Customer service (15%) and then scams (13%).

The next section looks in more detail about the top five product related subjects the FCA is contacted about, drilling down by type of enquiry or product type under each heading, these are:

  • Scams
  • Consumer Credit
  • Investment Products
  • General insurance


Latest trends in the retirement income market April – September 2016 

This section highlights some of the emerging trends found in the retirement income market data, during the two quarters between April and September 2016. This retirement income update, focuses on the different ways consumers access their pension pots and on consumer behaviour in relation to the use of regulated advisers, taking up products from their existing providers and the take up of pensions with guaranteed annuity rates (GARs).

The full data used to produce the analysis can be found in the data tables that are published alongside the bulletin.

  • Activity appears to have peaked in Q2 2016, with a slight drop off in Q3.
  • The number of pots accessed rose in Q2 2016 compared to Q1 2016 before decreasing slightly in Q3 2016.
  • Annuities – number purchased increased by 17% in Q2 2016 compared with Q1 2016, however purchases then decreased by 6% in Q3 compared to Q2 2016.
  • Full cash withdrawals by new customers increased by 43% in Q2 2016 compared with Q1 2016 and again then decreased by 10% in Q3 2016 compared to the previous quarter.
  • The same trend occurred in the number of new drawdown policies entered into and not fully withdrawn, these increased by 6% from Q1 to Q2 2016, before decreasing by 3% in the next quarter.


Use of advisers

  • Annuities – percentage of those recorded as using an adviser for annuity purchases has been on a constant decline over the last 4 quarters, currently at 33%.
  • Drawdown – those taking advice to access benefits through drawdown has remained consistently high over the last 4 quarters currently at 65%, although this peaked at 70% in Q1 2016.
  • Full withdrawal – there seems to be an increasing trend for those fully accessing their benefits to take advice, although this is still less than half at 47%.
  • UFPLS – 44% of those accessing benefits this way took advice, this appears to be a fairly consistent level over the last 3 quarters after jumping up from Q4 2015.


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