Autumn Statement 2014 - key private client measures

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In today’s pre-election Autumn Statement the Chancellor introduced a major change to the Stamp Duty Land Tax regime, but there were few other significant changes for high net worth individuals. Non-doms are faced with another increase in the remittance basis charge.

Stamp Duty Land Tax (SDLT)

From 4 December 2014 SDLT will not be charged at a single rate for the whole purchase price, but rather only the portion of the purchase price with falls within each SDLT band will be charged at the rate for that band. The effect of the changes is that anyone buying a property for less than £937,500 will pay less SDLT or the same than they would have done under the old regime. Anyone buying for more than £937,500 will pay more SDLT under the new rules. Under the new rules, on a:

  • £1m purchase you would pay £43,740 (instead of £40,000)
  • £2m you would pay £153,750 (instead of £100,000)
  • £5m you would pay £513,750 (instead of £350,000)
  • £10m you would pay £1,113,750 (instead of £700,000)

The new SDLT regime will apply if you exchange and complete on your purchase on or after 4 December 2014. If you exchanged contracts for the purchase of a property before 4 December 2014 but will complete on the purchase on or after 4 December 2014 you can choose whether the old or new SDLT rules will apply.

Non-UK domiciled remittance basis users (non-doms)

Once a non-dom has been resident in the UK for 12 out of the last 14 tax years if he wishes to claim the remittance basis he currently has to pay an annual remittance basis charge (RBC) of £50,000. This will increase to £60,000 from April 2015. A new higher RBC of £90,000 will also apply to remittance basis users who have been resident for 17 out of the last 20 tax years. The RBC of £30,000 for remittance basis users who have been resident for seven out of the previous nine tax years will remain unchanged.

The Government has also announced that it will consult on making the election to be a remittance basis user apply for a minimum of 3 years. Currently, non-doms can chose on an annual basis whether or not to claim the remittance basis and pay the RBC. In a year in which a non-dom will not receive substantial foreign income or gains he may consider that it is not worth claiming the remittance basis and paying the RBC. If the Government goes ahead with this proposal it would not be possible for non-doms to choose whether or not to claim the remittance basis on an annual basis and so non-doms may find they are required to pay the RBC for a tax year in which they have little or no foreign income or gains.

Inheritance tax & trusts

Following consultation the Government has announced that it will not introduce a ‘single settlement nil rate band’. The Government had proposed that rather than the amount of the nil rate band (NRB) which is available to a trust being calculated by looking at the lifetime gifts made by the settlor in the seven years before a trust was set up, instead, the NRB should be split between all trusts which the settlor had made. This proposal would have meant an end to ‘pilot trusts’ and would have impacted on anyone who has set up pilot trusts with the intention that those trusts will receive assets from their estate following their death. The Government is not pressing ahead with this proposal but will instead introduce new rules to target avoidance through the use of multiple trusts. No details of what these rules will involve have been published today.

Annual Tax on Enveloped Dwellings (ATED)

The ATED applies to UK residential properties owned by companies, partnerships (with a corporate member) or collective investment schemes (UK or non-UK), unless they are held as part of a property development business or let to third parties on a commercial basis. The rate of the ATED for properties worth more than £2m will increase by 50% above inflation from 1 April 2015. This means that the rates for 1 April 2015 to 31 March 2016 will be:

Property value ATED
£2m - £5m £23,350
£5m - £10m £54,450
£10m - £20m £109,050
£20m+ £218,200

Pensions

From April 2015, beneficiaries of someone who dies under the age of 75 will be able to receive their pension pot tax free, where no payments have been made to the beneficiaries before 6 April 2015.

Tax evasion

Following consultation the Government will extend the enhanced penalty regime for offshore tax evasion to include inheritance tax and will introduce a new aggravated penalty of up to a further 50% for moving hidden funds to circumvent international tax transparency agreements.

Savings – ISAs

The Government is to introduce legislation to allow spouses/civil partners who inherit their deceased spouse/civil partner’s ISA to continue to enjoy tax-free saving in relation to the funds in that ISA.

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