Autumn Statement – headline grabbers!

The Autumn Statement 2015 – headline grabbers!

In his first Autumn Statement and Spending Review as Chancellor of a stand-alone Tory government George Osborne’s speech lasted more than an hour and included a dramatic u-turn as he scrapped his recent plans to cut tax credits.

Our experts were glued to the coverage and below are some of the initial headline grabbing announcements from this lunchtime.

Advancing the due date for settlement of tax liabilities
There were two measures announced in today’s Autumn Statement that will have the effect of advancing the due date for settlement of tax liabilities as follows:

Stamp Duty Land Tax (SDLT). The window in which SDLT liabilities can be paid without penalty will reduce from 30 days to 14 days with effect from 2017/18. There is also going to be a consultation on other changes to the SDLT payment and filing process.

Capital Gains Tax (CGT) Currently, UK residents (and non-UK residents who are within the self-assessment regime) pay CGT on the sale of residential properties via self-assessment and, depending upon the timing of the disposal, the CGT liability would be due for settlement between 10 – 22 months after the disposal took place. Non-UK residents (who are not within the self-assessment regime) who dispose of UK residential property currently have to report and pay their CGT liability within 30 days of sale.

With effect from April 2019 onwards, all taxpayers who realise a capital gain on the disposal of residential property will have to pay their CGT liability within 30 days of a transaction taking place. This will mean that the taxpayer would need to estimate their taxable income for that year so that they can establish the rate of CGT that should be paid (ie whether it should suffer CGT at the rate of 18% and/or 28%). After the end of the tax year, if their estimate of income proved to be inaccurate and this impacted on the rate of CGT payable, they may need to submit a revised CGT computation and either reclaim any overpayment or, alternatively, settle any further liability due.

Higher rates of SDLT for purchases of buy to let properties and second homes
Purchasers of additional properties such as buy to let and second homes will pay higher rates of SDLT with effect from 1 April 2016. The higher rates will be 3% above current SDLT rates.

These new SDLT rates are not intended to apply to corporates or funds making significant investment in residential property and the government will shortly issue a consultation considering whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

Company car tax – benefit in kind
The 3% supplement which currently applies to diesel company cars was due to be removed in April 2016. It was announced in the Autumn Statement that this supplement will be retained until April 2021.

Tax credits broadly unchanged
The government have reversed their unpopular decision in the Summer Budget to cut tax credits. They are now leaving the rates and most of the thresholds unchanged. Consequently, the income threshold for child tax credit-only claimants will remain at £16,105 in 2016/17.

The income rise disregard has been reduced from £5,000 to £2,500 from April 2016. More taxpayers will find themselves having to repay tax credits to the Government where their income has increased by more than £2,500 from one year to the next.

Tax free childcare
As previously announced, Tax Free Childcare is set to replace the existing childcare vouchers system from early 2017. Unlike the childcare voucher system, the new system will be available for self-employed workers. Parents will open an online account into which they will pay money and the Government will automatically make top-up payments of 20p for every 80p paid in by the parent; up to a maximum top up of £2,000 per child each year. There is no restriction on the number of participating children, but naturally all funds held within these accounts must be used to pay for qualifying childcare.

The government has now announced that to be eligible for Tax Free Childcare, each parent must earn less than £100,000 per annum (reduced from £150,000) and each parent must be working at least 16 hours per week (increased from 8 hours) at the National Living Wage (£7.20 per hour from April 2016 for workers aged 25 and above). Taxpayers may choose to remain in the existing childcare voucher system where they are not eligible for Tax Free Childcare under the new system.

State pension will rise
From April 2016, the basic state pension will rise to £119.30 per week, an increase of £3.35. This will be the highest increase in real terms to the state pension for 15 years.

Small business rates relief
Small Business Rates Relief (SBRR) is to remain unchanged for 12 months from 1 April 2016. This is great news as the relief was due to be halved in April. SBRR offers 100% relief from business rates up to a rateable value of £6,000. Where the rateable value is between £6,000 and £12,000 the business rate relief is reduced on a sliding scale.

General Anti Abuse Rule penalty
A new penalty of 60% of the tax at stake will be introduced in 2016 for all cases successfully tackled by the General Anti Abuse Rule (GAAR). This is a further deterrent aimed at very affluent individuals or large companies undertaking highly contrived tax avoidance.

Voluntary liquidations
New rules will be introduced from April 2016 to ensure certain capital distributions are taxed as income rather than capital gains tax. This is aimed at tackling the use of voluntary liquidation as a tax planning tool, where liquidated companies are then re-opened by the same controlling shareholders. In many cases significant tax is saved by liquidating a company, with the shareholders paying capital gains tax (often at 10% if Entrepreneur’s Relief is available), but at a maximum rate of 28%. For taxpayers with income in the year of more than £43,000 this will be better than paying 32.5% tax on dividend income from the company, rising to 38.1% where income is more than £150,000. These changes mean that the capital distributions caught by the new rules will be taxed as income rather than capital.

Please pop back tomorrow morning when we will have had a chance to study the announcements further, and will have produced an informative easy-to-read booklet for you to download.