The Autumn Statement – how does it affect you?
Many of you will have watched or read details about the Autumn Statement delivered on 3 December. Here Lansdell & Rose summarise a few of the highlights that could affect commercial business owners and individuals alike. Some are for the positive, reductions in Stamp Duty Land Tax (SDLT), for properties priced under £937,500, changes to ISA regulations upon death as well as minor increases in the personal allowance, ISA allowance and state pension. On the other hand changes to Capital Gains Tax throws a spanner in the works for those looking to Incorporate for tax breaks.
The 2014 Autumn Statement did deliver, as anticipated, more substantial changes, in advance of the General Election next year.
1) Stamp Duty Land Tax (SDLT) rates (+)
The changes to SDLT would have put a smile on many people’s faces and a frown on others. Those who are part way through a transaction and have now found out that with immediate effect their SDLT could be significantly reduced if the property they are buying is under £937,500, will be delighted.
Previously, the tax charge applied to the whole property but now the introduction of a tiered approach will see savings on SDLR for many homebuyers. 98%, in fact, are expected to benefit from this change as well as a boost the economy as a whole from additional investment.
|Slice of property value (£)||Rate (%)|
2) Individual Saving Accounts (ISA’s) (+)
Previously, thousands of people were losing out on tax breaks from ISA’s when their spouse or civil partner passed away, even if they had saved the money together. From 3 December 14, the tax-free status of ISA savings will be carried forward to their spouse or civil partner upon death.
In addition, there will be an extra allowance provided to the surviving spouse equal to the value of the ISA savings pot. This comes into effect from April 2015.
Finally, on ISA’s, the annual allowance per person is due to rise marginally to £15,240 to further encourage investment.
3) Pensions (+)
Pensions have been a topical subject throughout the autumn of 2014 and it continues.
Those beneficiaries of pension holders who die under age 75 will now be able to receive payments tax-free. This is for “joint life” or “guaranteed term” annuity policies.
Read more about the many changes to pension planning in 2014, set to implement from April 2015
4) Other small benefits (+)
- There is to be a small increase in the Personal Allowance for 15/16 to £10,600
- The State Pension will also increase by a marginal 2.5%
- As previously proposed there will be a nil rate band for IHT
5) Tax benefits from Incorporation removed (-)
The news related to the removal of tax benefits associated with Incorporation is possibly the most significant business news from this Autumn Statement. At least for those trading as Sole Traders or Partnerships that perhaps had Incorporation earmarked as a future tax saving strategy.
Those business owners will now find themselves in an unfortunate position. Previously “goodwill” built up within the business could be effectively “sold” when transferring the business from a Sole Trader or Partnership to a Limited company. Tax was applicable under Capital Gains Tax, but was at the lower rate of 10%. With this increasing to 28% from 3 December 2014, it means that the tax benefits of incorporating have been reduced.
Additionally, in some cases the purchase of the sole trader goodwill could also be dealt with by the new Limited Company as a tax deductible expense. This benefit is also no longer available, and also with immediate effect.
Many businesses may still choose to Incorporate for commercial reasons in terms of the limited liability should the business fail, and the lower rate of corporation tax.
If this Autumn Statement has affected you or you would just like to find out more about business tax, property tax, personal tax and how you can carry out effective tax planning in 2015, contact our commercial team who would be happy to help.
T: 020 7376 9333