The speech contained the headline-grabbing set pieces – a stamp duty land tax break for first time buyers, investment in the regions, the construction and housing sector and technology industry as well as much cheered changes to business rates and freezing of beer duty.
The personal allowance rose to £11,850; with the higher rate threshold also rising to £46,350 from April 2018, with calculations showing that a higher rate taxpayer on £50,000 will be £236 better off a year. For higher earners, there was also a reminder that “the top 1% are paying a larger share of income tax than at any time under the last Labour Government. The poorest 10% have seen their real incomes grow faster since 2010 than the richest 10%”.
There was also a sigh of relief from many that pensions, agricultural and business property relief remained untouched for now.
Key changes that will affect families and individuals in the coming year
The lifetime allowance
The amount a person can save overall in approved pension schemes will increase to £1,030,000 in line with CPI. Historically, budgets have cut the allowance, rather than increased it.
Trusts The Government will consult in 2018 on making the taxation of trusts ‘simpler, fairer and more transparent’. It remains to be seen whether the consultation will be targeted at specific areas or will ask for general comments on all areas of trust taxation. There is also a question over whether this could result in further tax increases for trustees who have already seen significant changes in recent years.
In spring 2018, there will be a consultation on continuing ER where an entrepreneur’s qualifying 5% holding is diluted following a commercial fundraising. Concerns have been raised that entrepreneurs, whose holdings are reduced below the 5% threshold because of issuing new shares as part of a commercial fund raising, lose the benefit of ER on their remaining shares. This risks entrepreneurs choosing either to cease their involvement in the business or to avoid dilution by not undertaking the necessary fundraising.
Deferral of proposed 30 day CGT payment window on residential property
After the original announcement in 2015, the workability of these rules and the need to ensure fairness has been questioned. Specifically, rates of tax to be paid, the interaction of capital losses and the annual exemption and circumstances where valuations were required would all need clarification.
A consultation was expected on this in 2016. As this has not yet materialised, this delay is perhaps not surprising; particularly given the concerns that need to be addressed.
CGT on commercial property held by overseas investors
Non-residents have been subject to tax on capital gains on UK residential property since 2015. The Government will now consult with a view to legislating to ensure any capital gains on immovable UK property will be subject to UK tax from April 2019. This aims to encompass gains on the disposal of UK commercial property and indirect sales such as some holdings in companies where more than 75% of the value is attributable to UK property.
The document released contains some welcome statements about the potential simplification of complications where existing taxes overlap. We will have to wait and see what targeted exemptions are included within the legislation to understand the full impact of this proposal. Neither inheritance tax nor a change to stamp duty land tax were mentioned; but this could be the start of a full alignment of taxation treatment for commercial and residential property as a way of raising revenue for the Exchequer.
Offshore tax evasion and non-compliance
Companies will, in the future, be compelled to inform HMRC of any offshore structure they are involved in and the clients using them. £300m will be given to HMRC to invest in staff and technology. There was also a suggestion that HMRC could be given broader powers to assess an individual’s offshore history and, combined with the requirement to correct, this could be a significant change. The new rules do not take effect until 6 April 2018, which gives a window of opportunity to take any necessary action to be ready for the change.