Natalie Smith, our Tax, Trusts & Estate Planning Consultant provides her summary of the Autumn Budget 2017.
Summary of key points:
- Stamp Duty Land Tax (SDLT) abolished from 22 November 2017 for first-time buyers on homes costing up to £300,000 – no SDLT on for first-time buyers on the first £300,000 on homes costing up to £500,000.
- Capital Gains Tax annual exempt amount increases from £11,300 to £11,700 2018/19 – the rates of tax are unchanged (see below)
- Indexation allowance (which gives companies relief for the effect of inflation on capital gains) will be frozen at January 2018 for disposals after that date. This removes the relief for inflation when calculating chargeable gains of companies, and raises increasing amounts each year, with around £500 million in 2022/23.
- Income tax personal allowance and higher rate tax threshold to rise by inflation to £11,850 and £46,350 respectively in April 2018 – tax rates and thresholds for Scottish taxpayers will be confirmed by the Scottish Parliament in its draft Budget on 14 December.
- Rules for the Marriage Allowance (also known as the Transferrable Tax Allowance) will be revised to allow claims to be made following the death of a partner, backdated by up to four years.
- Abolition of Class 2 National Insurance and reform of Class 4 NIC for self employed is deferred until April 2019 to assess impact on contributory benefits.
- Increases in business rates will be indexed by the CPI measure of inflation from 1 April 2018 whereas business rates are currently increased by RPI – a measure of inflation that is generally higher. This change has been brought forward from 2020.
- VAT registration threshold frozen at £85,000 for two years.
- The rate of the Research and Development Expenditure Credit increases from 11% to 12% with effect from 1 January 2018.
- The lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018-19.
Capital Gains Tax
- Tax rates remain at 10% (total income and gains within the taxpayer’s basic rate limit) or 20% (gains above the basic rate limit) on assets in general, but 18% or 28% on residential property that is not eligible for the main residence exemption, and on ‘carried interest’ of investment fund managers. Most trusts benefit from half the annual exempt amount (£5,850) and pay tax at 20% or 28% on chargeable gains.
- Non-UK residents used to pay no tax on gains on UK property. A charge was introduced for gains on residential property situated in the UK with effect from 6 April 2015. It is now proposed to extend this to non-residential property with effect from 1 April 2019 (companies) or 6 April 2019 (individuals and trusts). Only the gain accruing after that date will be charged. This change effectively means one of the incentives to invest in UK property by non-residents has been removed.
- The Autumn Statement 2015 announced an intention to advance the due date for CGT on the sale of residential property to 30 days after the completion of a sale if a chargeable gain arose, so on the sale of a buy-to-let or furnished holiday letting property, it would significantly advance the payment of the tax from 31 January following the end of the tax year. The measure was to be introduced with effect from 6 April 2019, but the current Budget delays this until April 2020.
Tax avoidance and evasion
- Over 100 measures to tackle tax avoidance, evasion, non-compliance and aggressive tax planning were introduced between 2010 and 2017. A policy paper has been published alongside the Budget which details the 18 further measures announced at Autumn Budget 2017. These further measures and additional investment in HMRC are forecast to raise a further £4.8 billion between now and 2022-23.
- The government will tackle disguised remuneration avoidance schemes used by close companies (companies with five or fewer participators) by introducing the close companies’ gateway (revised following consultation) and measures to ensure liabilities from the new loan charge are collected from the appropriate person. Further details can be found in the policy paper published alongside the Budget.
Estate planning in a complex and evolving tax system is challenging so whether for long-term planning, business or personal affairs, sound and professional advice is paramount.