Please feel free to get in touch

Support Material

Autumn Statement 2014

Our Summary

Introduction
Today the Chancellor delivered his last Autumn Statement in this parliament before the general election in May 2015. It sets out the next stage in the government’s long term economic plan. 

This note sets out the main changes to tax rates and allowances for individuals, companies and trustees. It also aims to identify other notable changes which may be of interest to advisers. That said, this note does not purport to cover all changes.

Income Tax 

  • The tax-free personal allowance will rise to £10,600 from 6 April 2015. This represents an extra £100 increase over the previously announced figure of £10,500.
  • Higher rate tax threshold will rise to £42,385 from 6 April 2015, the first time this threshold has been raised in line with inflation for five years.
  • Additional rate tax threshold remains at £150,000. 

Capital Gains Tax (CGT)

  • As previously announced by the Chancellor the annual exempt amount will rise to £11,100 from 6 April 2015. 

Inheritance Tax (IHT)

  • No announcements on reviewing the nil rate band (NRB) so the position remains the same, namely NRB frozen at £325,000 until 2017.
  • The government will extend the existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service to also cover members of the emergency services and humanitarian aid workers responding to emergency circumstances. It will have effect for deaths on or after 19 March 2014. 

Inheritance Tax and Trusts

  • As a result of consultation following the 2014 Budget, the government will not introduce a single settlement nil-rate band. The government will introduce new rules to target avoidance through the use of multiple trusts. It will also simplify the calculation of trust IHT tax. Details are expected in the Finance Bill 2015. 

Corporation Tax

  • From 1 April 2015, the government will restrict the amount of banks’ profits that can be offset by carried forward losses to 50%, increasing their contribution to public finances through their corporation tax payments.
  • Again from April 2015 the government is introducing a new tax to counter certain tax avoidance arrangements where some large multinational companies divert profits abroad through complicated business structures, such as the so-called ‘double Irish’, in order to avoid paying taxes. The ‘Diverted Profits Tax’ will apply to a company’s profits that have been diverted from the UK through complex arrangements such as these, and will apply to both UK and foreign multinational companies. So, if a company conducts a lot of activity in the UK – sales, for example - but can avoid paying corporation tax by moving profits generated in the UK to other countries through the manipulation of the international tax rules, HMRC will now be able to tax those profits at a rate of 25%.
  • The government is also looking to stop individuals and partnerships from gaining an unfair tax advantage by transferring their businesses into a company they control, and then claiming corporation tax deductions for assets linked to the business’ reputation and customer relationships.

Pensions

  • Further to the announcement on 29 September 2014 the Chancellor has confirmed that from 6 April 2015, members of defined contribution (DC) pension schemes will be able to access their pension savings as they wish at the point of retirement, with income over and above any tax-free cash being subject to their marginal rate of income tax.
  • From 6 April 2015, beneficiaries of individuals who die under the age of 75 with remaining uncrystallised or drawdown DC pension funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free provided no payments have been made to the beneficiary before 6 April 2015.
  • The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary.
  • Where the individual was over 75, the beneficiary will pay the marginal rate of income tax, or 45% if the funds are taken as a single lump-sum payment. From 2016/17 tax year this will change further and lump sum payments will also be taxed at the beneficiary’s marginal rate. 
  • There will be a reduced annual allowance of £10,000 for those with DC schemes once they have used the new flexibility to access their pension savings from 6 April 2015.
  • Transfers from funded defined benefit schemes to DC schemes will still be allowed in the context of the new flexibilities.
  • The Small Pots rules which allow members of DC schemes to take up to 3 pension pots from nonoccupational schemes, or an unlimited number from occupational schemes up to £10,000, will continue to apply from 6 April 2015. Individuals will be able to take their small pots without being subject to the reduced annual allowance of £10,000, nor will they be included for lifetime allowance purposes. The age at which these small pots can be taken will also be lowered from 60 to 55 from 6 April 2015.
  • Following informal consultation since the 2014 Budget, it has been decided to keep the age limit at which tax relief can be claimed on pension savings at 75.
  • From April 2015 the full Basic State pension will rise by £2.85 a week.
  • Methods of assessing means-tested benefits for those over the Pension Credit qualifying age have changed. Notional income rules applied to pension pots that have not been accessed, or which have been accessed flexibly, will change from 150% to 100% of the income an equivalent annuity would offer, or the actual income taken if higher.
  • Standard minimum Pension Credit income guarantee will rise in line with the cash increase in the Basic State Pension.

ISAs

  • The annual subscription limit will increase to £15,240 from 6 April 2015, and at the same time the JISA and Child Trust Fund (CTF) subscription limits will increase by £80 to £4,080.
  • As of 3 December 2014, if an investor in a marriage or civil partnership dies, their spouse or civil partner will inherit their ISA tax advantages. It appears the way this will work is that, from 6 April 2015, surviving spouses will be able to invest as much into their own ISA as their spouse used to have, in addition to their usual allowance.

Stamp Duty Land Tax

  • Under the old rules stamp duty was paid at a single rate on the entire property price. With effect from 4 December 2014 stamp duty will increase progressively and tax will be payable on the part of the property price which falls within each band.
  • The new rates and bands are:-

Purchase price band

Tax rate on part of property price within band

£0 - £125,000

0%

£125,001 - £250,000

2%

£250,001 - £925,000

5%

£925,001 - £1,500,000

10%

£1,500,001 and over

12%

  • So from 4 December 2014 the stamp duty payable on a property which sells for £275,000 will be £3,750, an effective rate of 1.4% and a saving of £4,500 compared to the previous regime.
  • Under the new rules the stamp duty payable will be lower than or equal to that payable under the old regime for property prices up to £937,500.
  • The new rules will apply in Scotland until 1 April 2015, when they will be replaced with the Land and Buildings Transaction Tax.
  • HM Treasury have produced a useful factsheet covering this reform in more detail.

National Insurance

  • From April 2015, employers will no longer pay National Insurance contributions for any employees under the age of 21 on earnings up to the upper earnings limit.
  • In addition employer National Insurance contributions for apprentices aged under 25 on earnings up to the upper earnings limit will be abolished from April 2016.

Miscellaneous

  • The government will increase the annual charge paid by some non-domiciled individuals resident in the UK who wish to retain access to the remittance basis of taxation. The charge paid by people who have been UK resident for 7 out of the last 9 years will remain at £30,000, the charge paid by people who have been UK resident for 12 out of the last 14 years will increase from £50,000 to £60,000 and a new charge of £90,000 will be introduced for people who have been UK resident for 17 of the last 20 years.
  • The government will extend the doubling of Small Business Rate Relief (SBRR) for a further year from 1 April 2015.
  • Travel expenses paid to councillors by their local authority are to be exempt from income tax and employee NICs from 6 April 2015. The exemption will be limited to the Approved Mileage Allowance Payment (AMAP) rates where it applies to mileage payments.
  • Legislation will be introduced, effective from 6 April 2015, to stop investment fund managers from disguising their guaranteed fee income as capital gains in order to avoid income tax. This will not affect sums linked to performance, nor returns which are exclusively from investments by partners.
  • Consultation will take place on a proposal to introduce a new power, enabling HMRC to achieve early resolution and closure of one or more aspects of a tax enquiry whilst leaving other aspects open.
  • UK search and rescue and air ambulance charities will be eligible to claim refunds on VAT they have paid on purchases of goods and services for their non-business activities from April 2015.


Inevitably, more issues will arise and further details of changes will emerge as new information becomes available. In the meantime if you have any questions regarding any of the above, please email technical@sanlam.co.uk

December 2014

Please Remember...

This note is for use by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam Investments and Pensions accepts no liability for any action taken or not taken by any individual or firm as a result of the contents of this material. Whilst we have made every effort to ensure the accuracy of this material we cannot accept responsibility for any consequences (financial or otherwise) arising from relying on it.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.