Further to yesterday’s Autumn Statement we set out below a very brief note of some of the key items announced
With effect from midnight on 3 December 2014 the method of calculating the stamp duty chargeable on the purchase of residential property by a natural person has changed. Previously the stamp duty rate was determined by the value of the property, but the rate applied to the whole property value. From today the stamp duty rates operate in bands (like income tax), but with higher rates in the higher bands. As a consequence, properties purchased for more that £937,500 will have a higher stamp duty burden from today. A table of Stamp Duty rates effective from today is available on our website.
Annual Tax on Enveloped Dwellings (“ATED”)
The annual tax on enveloped dwellings will increase by 50% above inflation from 1 April 2015. Houses in the £2m to £5m range will have an annual charge of £23,350; those in the £5m to £10m range will have an annual charge of £54,450; and properties valued between £10m and £20m will be charged £109,050. Properties valued at more than £20m will have an annual charge of £218,200.
Income Tax rates and thresholds
There have been inflationary increases in the Income Tax thresholds with no changes to the rates of the respective bands. Tables of income tax rates and thresholds for 2015-2016 are available on our website.
Remittance Basis Charge rates
The Remittance Basis Charge (“RBC”) will be tiered with an additional threshold and a higher rate of charge. From 1 April next year UK resident non-domiciled taxpayers taking advantage of the RBC fee will pay £30,000 once they have been in the UK for seven of the previous nine tax years; £60,000 (previously £50,000) once they have been resident in the UK for 12 of the past 14 years; and there will be a higher charge of £90,000 where the RBC is claimed by an individual resident in the UK for 17 out of the previous 20 years. There will also be a separate consultation on making the RBC election last for three years so that taxpayers are not able to dip in and out quite so frequently.
Personal Pension Changes
The government continues to increase the flexibility of taking pension benefits. From April 2015, individuals will be able to benefit from their defined contribution pension scheme as they wish at the point of retirement, subject to income tax at their marginal rate, instead of the current 55% for full withdrawal. Further, from that date individuals should be able to pass on any unused defined contribution pension savings to any nominated beneficiary when they die, instead of paying the 55% charge that currently applies. If the individual dies before their 75th birthday, the beneficiary will pay no tax on the pension funds, but if the individual is 75 or over, the beneficiary will pay their marginal rate of Income Tax, or 45% if the funds are extracted as a lump sum.
Entrepreneur’s Relief extension
Where gains qualifying for Entrepreneur’s Relief are reinvested into qualifying EIS (or Social Investment Tax Relief) investments, there should be a relief available such that the investor benefits from Entrepreneur’s Relief on the subsequent disposal of the EIS (or SITR) investment. It will be interesting to see how the loss relief elements are expected to work if the EIS investment fails, but the ability to roll over and defer the gain through this investment relief might prove attractive. Other measures will stop individuals claiming Entrepreneurs’ Relief on a transfer of goodwill to a company controlled by them.
National Insurance Contributions – Employer’s Allowance
From April 2015 the £2,000 annual NIC Employer’s allowance is to be extended to households which employ care and support workers.
Corporation Tax rate
Not amended in the Autumn Statement, but just a reminder that from 1 April 2015 the main rate of corporation tax falls to 20%. Provisions are to be introduced to stop individuals transferring businesses to companies they control and then claiming a corporation Tax deduction for assets linked to the business’ reputation and customer relationships (goodwill).
The Capital Allowances Annual Investment allowance is to be doubled to £500,000 until 31st December 2015.
Research and Development (“R&D”)
The rate of the Small and Medium sized Enterprise (“SME”) scheme will increase from 225% to 230% from 1 April 2015, but qualifying expenditure will be restricted. The government will have also suggested that they will streamline the application process for smaller companies investing in R&D.
Inheritance Tax and Trusts
Following consultation new rules will be introduced to target avoidance through the use of multiple trusts rather than introducing a single settlement nil rate band.
Tax avoidance / evasion
The government continues to tackle tax avoidance at both the corporate and personal levels. A new Diverted Profits Tax is being introduced to tackle arrangements that the government considers artificial with the intention to divert profits overseas, and a DOTAS taskforce (Disclosure of Tax Avoidance Schemes) will target personal tax avoidance schemes. Specific legislation which the government believes have been abused such as miscellaneous loss relief is also being targeted by anti-avoidance measures.
The government is also intending to increase the amount and scope of civil penalties for tax evasion and to review how best to enhance the incentives for obtaining information on offshore tax evaders.
This summary has been kept deliberately brief. If you’d like to discuss any of the above items, or anything else you might have read in relation to the Autumn Statement, we’d be delighted to hear from you.