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Autumn Statement 2015
We discuss some of the main highlights announced in the Chancellor George Osborne’s Autumn Statement, covering areas such stamp duty changes, capital gains tax, pensions and social care reforms. We examine how the changes could impact your financial wealth planning.
Stamp duty on additional properties
The Chancellor has announced that higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy-to-let properties and second homes, from 1 April 2016.
The higher rates will be 3 percentage points above current SDLT rates.
The higher rates will not apply to purchases of caravans, mobile homes or houseboats. Corporates or funds making significant investments in residential property will also be exempt from the higher rates given “the role of this investment in supporting the government’s housing agenda”.
The current rates and new rates of SDLT for additional residential property purchases are:
|Band||Existing SDLT rates||New additional SDLT rates|
|*£0 – £125k||0%||3%|
|£125k – £250k||2%||5%|
|£250k – £925k||5%||8%|
|£925k – £1.5m||10%||13%|
*Only applies to purchases over £40,000. For purchases at £40,000 or under no SDLT return is required.
So, as an example, if you buy a buy-to-let property or second home for £275,000 in this tax year, the SDLT you will owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
- Total SDLT = £3,750
From April 1, 2016 the SDLT you owe will be calculated as follows:
- 3% on the first £125,000 = £3,750
- 5% on the next £125,000 = £6,250
- 8% on the final £25,000 = £2,000
- Total SDLT = £12,000
The Chancellor said that he expected the new higher rate of Stamp Duty on additional residential properties to raise an additional £625 million a year in tax in 2016-17 rising to £880 million a year by 2020-21.
He said the government will now consult on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate. It will also consult on whether there should be a reduction in the filing and payment window of Stamp Duty from 30 days to 14 days.
Any changes agreed after the consultation process will come into effect in 2017-18.
Capital Gains Tax on additional properties
Capital Gains Tax (CGT) due on residential property is currently paid between 10 and 22 months after a disposal is made. From April 2019 this will have to be paid within 30 days of completion of any disposal of residential property.
This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.
The Chancellor said that the new requirement was being introduced because the current delay can cause problems where a taxpayer forgets to pay or where they no longer have enough of the proceeds from the disposal to cover the tax charge.
He said the requirement will not be introduced until April 2019 in order to ensure that HMRC’s digital systems are ready to provide support, making paying this tax simpler and quicker for taxpayers. The government will publish draft legislation for consultation in 2016
The Chancellor has confirmed that the government’s response to this summer’s consultation on reform of personal tax relief will be published as part of next year’s Budget which is expected in March 2016.
This means that there is now a clear timeframe for those concerned that they may lose out from any reforms and that they should now act to ensure they make the most of the current rules.
Mr Osborne also set out changes to the arrangements for inheritance tax and undrawn pension funds in drawdown pensions. He said the government will legislate to ensure a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011.
It was also announced that individuals will be allowed to sell their annuity income stream, but that details will not be available until next month with legislation scheduled for 2017.
The Chancellor announced a number of changes to the state pension, including:
- The government will increase the basic State Pension by the “triple lock” for 2016-17, meaning a full basic State Pension will rise to £119.30 a week, an increase of £3.35.
- The starting rate for a full new State Pension will be £155.65 per week from April 2016.
The actual level of State Pension paid to each individual will continue to be calculated based on their National Insurance Contributions.
More than 5.4 million people have now been auto-enrolled into a pension. Mr Osborne claimed that opt outs from automatic enrolment have been low and, as a result, the number of people who are saving for their retirement is at its highest point since 1997.
He announced that in order to simplify the administration of automatic enrolment for the smallest employers in particular, the next two phases of minimum contribution rate increases will be delayed by six months in order to align them with the start of the tax year.
This means that instead of increases taking place in October, they will now occur in April of the following year
The Chancellor announced the following changes to tax bands and rates. The limits on ISAs remain unchanged because inflation was flat and the limits are normally increased in line with CPI, which was zero in September.
|Tax Bands and Rates||2015-16||2016-17|
|Starting rate for savings income||0%||0%|
|Dividend ordinary rate||10%||7.50%|
|Dividend upper rate||32.50%||32.50%|
|Dividend additional rate||37.50%||38.10%|
|Starting rate limit||£5,000||£5,000|
|Basic rate band||£0-31,785||£0-32,000|
|Higher rate band||£31,786-£150,000||£32,001-150,000|
|Additional rate band||Over £150,000||Over £150,000|
|Income Tax Allowances||2015-16||2016-17|
|Personal Allowance – born after 5 April 1938||£10,600|
|Personal Allowance – born before 5 April 1938||£10,660|
|Personal Allowance – all ages||£11,000|
|Income limit for personal allowance||£100,000||£100,000|
|Income limit for personal allowances (born before 6 April 1938)||£27,700|
|Income limit for married couple’s allowance||£27,700|
|Married couple’s allowance for those born before 6 April 1935:|
|Maximum amount of married couple’s allowance 7 8||£8,355||£8,355|
|Minimum amount of married couple’s allowance 7 8 9||£3,220||£3,220|
|Blind person’s allowance||£2,290||£2,290|
|Personal savings allowance for basic rate taxpayers||N/A||£1,000|
|Personal savings allowance for higher rate taxpayers||N/A||£500|
|Tax-free Savings Account||2015-16||2016-17|
|Individual Savings Account (ISA) subscription limit||£15,240||£15,240|
|Junior ISA subscription limit||£4,080||£4,080|
|Child Trust Fund (CTF) subscription limit||£4,080||£4,080|
Social care reforms
The government had already taken the decision to postpone the introduction of social care reforms, known as the “Dilnot” reforms, that were due to come into effect in 2016.
These reforms were designed to cap the cost of individual contributions towards long term care and raise the level of assets an individual could own before they were required to fund their care fees.
The Chancellor used the Autumn Statement to reconfirm the government’s commitment to implement these reforms from 2020.
Deeds of variation
The Chancellor announced that following a review of the current arrangements around deeds of variation, the government will not introduce new restrictions on how deeds of variation can be used for tax purposes but will continue to monitor their use.
Venture capital schemes
With effect from 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities for venture capital schemes.