While there were limited new personal tax announcements in the Autumn Budget, there were still some important changes and proposed consultations that people should be aware of.
Smith & Williamson’s private client tax partners highlight four areas that some may have missed.
More will be dragged into marginal tax bands – Not all will benefit from increases to the personal allowance (which will increase in 2018/19 to £11,850) and the higher rate threshold (which will rise from £45,000 to £46,350).
Chris Springett, private client tax partner comments: “While the increases to the personal allowance will be welcomed by many taxpayers, some may get caught in a tax trap. Those with incomes above £100,000 will generally continue to see the personal allowance restricted by £1 for every £2 of income above this threshold. This leads to an effective 60% marginal tax rate, subsequently dropping back to 40% (or 70% dropping back to 50% where they also lose some of their pension annual allowance). Due to inflation and the fact that the £100,000 income limit has not changed since its introduction in 2010/11, more people will fall into these categories.”
The Government will consult in 2018 on making the taxation of trusts, in its words, 'simpler, fairer and more transparent’.
Julia Rosenbloom, private client tax partner comments: "Trusts allow for controlled gifting to the next generation, but they have lost their appeal because of potentially high lifetime tax charges associated with establishing them. As the Budget announcement provides little detail, it is unclear whether the consultation will be targeted at specific areas or if it will ask for general comments on all areas of trust taxation. There is also a question mark over whether the consultation could result in further tax increases for trustees who have already seen significant changes in recent years. Given the increased administrative burden recently created for trustees by the difficulties in implementation of the Trusts Register, it is hoped that the Government will listen closely to feedback provided as part of the consultation."
Extension of the four and six year assessment time limits to at least 12 years for offshore tax non-compliance.
Louise Somerset, private client tax partner comments: "This is a significant extension to the current time limit for non-deliberate behaviour of four years, or six years where the behaviour is found to have been careless. This change will mean that taxpayers will, in the future, have much less certainty over historic offshore tax matters, and where genuine mistakes have been made this could come back to bite at a much later date. It is also striking that the penalties for errors onshore and offshore are so dramatically different.”
From April 2019, overseas investors are likely to be liable to capital gains tax on gains realised on the sale of all UK property, not merely UK residential property.
Louise Somerset, private client tax partner comments: "We anticipate that this could be the start of more alignment of residential and commercial property rules and we could see many overseas investors sell-up in the UK before April 2019. Lobbying can be anticipated from those representing widely-held property funds given the wide scope of the initial proposals. We will have to wait and see what targeted exemptions are included within the legislation to understand the full impact of this proposal."