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The UK Chancellor of the Exchequer today presented the 2014 Autumn Statement which was his final chance to impact the tax regime before the General Election. Most of the changes were at the margins but this newsletter summarizes some of the main changes that will affect individuals and businesses.
The flagship announcement was the change in the Stamp Duty from a step tier rate system to a marginal rate system with the following rates:
|
Amount |
% |
|
£0 – £125,000 |
0% |
|
£125,000 – £250,000 |
2% |
|
£250,001 – £925,000 |
5% |
|
£925,0001 – £1,500,000 |
10% |
|
£1,500,001 + |
12% |
As a result, if you purchase a property for £275,000, the Stamp Duty would be calculated as follows:
|
Amount |
% |
Stamp Duty |
|
£125,000.00 |
0% |
£0.00 |
|
£125,000.00 |
2% |
£2,500.00 |
|
£25,000.00 |
5% |
£1,250.00 |
|
£275,000.00 |
£3,750.00 |
This represents a saving of £4,500.00 against the current method and the new method come into effect from 4th December 2014. If you have already exchanged but not completed on a property you will have a choice about whether to use the old or new rules.
There was modest additional increase to the Personal Allowance for the 2015-16 tax year of £100 increasing the total to £10,600. The Basic Rate tax threshold will also increase to £31,785 resulting in the overall amount over which individuals start to pay Income Tax at £40% will be £42,385.
Again, a modest increase to the limit for Individual Savings Accounts (ISAs) was stated for 2015-16 to £15,240 with the Junior ISA and Child Trust Fund limits both to be increased to £4,080.
However, the government will legislate to allow an additional ISA allowance for spouses or civil partners when an ISA saver dies equal to the value of that saver’s ISA holdings on their date of death.
In a similar vein, from April 2015, beneficiaries of individuals who die under the age of seventy-five with remaining uncrystallised or drawdown defined contribution Pension Funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free. This is under the proviso that no payments have been made to the beneficiary before 6th April 2015.
Where the individual was over seventy-five, the beneficiary will pay at their marginal rate of Income Tax or at 45% if the funds are taken as a lump sum payment.
The Autumn Statement also revealed that Air Passenger Duty would be abolished for children under twelve from 1st May 2015 and this would be extended to children under sixteen from 1st March 2016.
The interim finding of the review into the overhaul of the Business Rates system will be published in December 2014 with the government then conducting a review of the future structure of Business Rates to report by Budget 2016.
In the meantime, the government will extend the doubling of Small Business Rate Relief for a further year from 1st April 2015.
In addition, the Business Rates discount for retail and food and drink premises with a rateable value up to £50,000 will increase to £1,500 from 1st April 2015.
There were no momentous changes to Capital Gains Tax other than a tightening of the rules for Entrepreneurs’ Relief to restrict unfair tax advantages from the disposal of goodwill where that disposal is to a related close company. This change comes into effect from 3rd December 2014.
However, also from 3rd December 2014, the government will allow gains which are eligible for Entrepreneurs’ Relief but which are instead deferred into investments which qualify for the Enterprise Investment Scheme or Social Investment Tax Relief to remain eligible for Entrepreneurs’ Relief when the gain is realized.
A notable alteration has been made to the Taxation of Resident Non-Domiciles who utilize the remittance basis of taxation. The charge paid by people who have been UK resident for seven out of the last nine years will remain at £30,000. However, the charge paid by people who have been UK resident for twelve out of the last fourteen years will increase from £50,000 to £60,000 and a new charge of £90,000 will be introduced for people who have been UK resident for seventeen of the last twenty years.
The Chancellor declared that there would be a continuing crackdown on tax avoidance and evasion with the primarily measure being the introduction of a Diverted Profits Tax to counter the use of aggressive tax planning techniques by multinationals to divert profits from the UK. From 1st April 2015, at tax of 25% will be applied to profits generated in the UK.
More transparency is to be introduced to the Disclosure of Tax Avoidance Schemes (DOTAS) with the HMRC to publish summary information about tax avoidance promoters and schemes that are notified under the regime.
For acquisitions made on or after 3rd December 2014, a company will no longer receive Corporation Tax Relief on the acquisition of goodwill where that acquisition is from a related individual or partnership.
Despite a heavy campaign from HMRC, the government determined not to make any changes to the mechanism for the tax on Loans from close companies to individuals, trusts and partnerships that have a share or interest in them.
To boost business finance for SMEs, the Funding for Lending Scheme will be extended by a year until 29th January 2016 and £400,000,000 will be provided to the British Business Bank to prolong the Enterprise Capital Fund. In addition, the Enterprise Finance Guarantee will support up to £500,000,000 of new lending in 2015-16.
As the Peer-to-Peer platform becomes a more prevalent way for business to raise finance, the government will introduce a new relief to allow individuals lending through P2P platforms to offset any losses from loans which go bad against their other P2P income. This will take effect from April 2016 and will allow individuals to make a claim for relief on losses incurred from April 2015 through their Self-Assessment tax return.
If you would like more detailed guidance on the impact of any of the Autumn Statement announcements, whether or not featured in this newsletter, or have a specific question, please contact welcome@cooperfaure.co.uk and we would be pleased to advise you.
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