Christmas comes early for taxpayers in light of next year’s election
The Chancellor grasped opportunities for populist giveaways through, for example, changes to SDLT and changes on the inheritance of ISAs and pensions, backed up by an ever-sharper focus on eliminating perceived tax avoidance and non-compliance.
Add to this is a long-awaited rise in the income tax threshold for those on the 40% tax band, and we get an attractive bag of sweeteners, to appeal to the vast majority of people, of which Santa would be proud.
Given that these measures do not appear hugely expensive, but will be useful to a lot of individuals, the Chancellor also kept an eye on balancing the books.
Mass affluent to benefit from ISA relaxation
The mass affluent will benefit from a relaxation in ISAs whereby on the death of a spouse or civil partner, investments within an ISA wrapper can be transferred intact, to the surviving partner. This is a very helpful and practical simplification which will appear to thousands of couples given the volume of investments which have been built up over the years in such vehicles.
Entrepreneurs’ relief to encourage long term strategies
Positive news on the extension of entrepreneurs’ relief to gains deferred into Enterprise Investment Schemes or social investment tax relief investments. These developments will encourage longer term strategies rather than the short term cashing in of investments to ‘bank’ entrepreneurs relief and therefore will encourage the development of our enterprise economy.
‘Enveloped’ residential properties (ATED)
However, there are a number of pitfalls for high earners elsewhere. A 50% increase on the charges on enveloped residential properties, ie held through companies, will squeeze those who often hold property in this way for inheritance purposes, particularly non-doms. The removal of the slab system for stamp duty will leave many property buyers happy. However, this increase will leave those buying the 2% most expensive properties incurring a far greater charge in stamp duty.
Increase in remittance charge
The proposals to increase the charge on non-domiciled individuals, who elect to pay tax on the remittance basis (ie on income and gains brought into the UK) sensibly does not affect the people coming to the UK in their first few years here, so should do little to detract from the UK’s attractiveness. A higher charge will kick in for non-doms who have been resident in the UK for 12 of the past 14 years and also brings in a new threshold for those who have been resident for 17 of the past 20 years.
Remittance charge minimum period
The measure that has the potential to have the greatest impact for non-doms is that the government plans to consult on making the election to pay the remittance basis charge apply for a minimum of 3 years. This will mean that non-domiciles will not be able to so easily arrange their tax affairs so they only pay the charge in occasional years, linked to when income and gains are brought into the UK. If this proceeds, non-domiciles will need to consider their election decisions carefully.
National Tax Partner
T: 020 7131 4252
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Smith & Williamson is the official sponsor for the National Business Awards’ search for the Entrepreneur of the Year in both 2013 and 2014.
Smith & Williamson LLP
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International
The word partner is used to refer to a member of Smith & Williamson LLP.