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The Chancellor of the Exchequer gave his annual Autumn Statement to Parliament on 3rd December 2014.  The following is a summary of the main points.

 

Personal Allowance and Income Tax

 

The personal allowance, the level below which no income tax is payable, will rise from £10,000 to £10,600 in April.  On previous occasions when the personal allowance has been raised, the Chancellor has prevented 40% taxpayers from benefiting by simultaneously cutting the higher-rate threshold.  However, the higher rate threshold will also be increased to £42,385 in 2015/16.  The changes will be worth £120 to a typical basic-rate taxpayer and £172 to a typical higher-rate taxpayer.

 

The 10% starting rate tax band for savings interest will increase to £5,000.  This will benefit anyone who receives less than £15,600 from employment, investment and pension income.

 

From 6th April 2015, married couples and civil partners will be able to transfer £1,060 of their unused personal allowance to their spouse or civil partner, so long as the recipient is a basic rate taxpayer.

 

Capital Gains Tax

 

The capital gains tax allowance will rise from £11,000 to £11,100.

 

ISAs

 

As expected, the 2015/16 ISA allowance will increase by inflation to £15,240.

 

In a surprise move, the tax efficient status of ISA wrappers may now continue following the death of an ISA holder.  Traditionally, ISAs were automatically converted on death to taxable savings and investment accounts.  The full value of the ISA can now be inherited by a surviving spouse or civil partner and continue to benefit from tax-efficient interest, investment income and growth.

 

Pensions

 

 

The Autumn Statement confirmed an important change to the taxation of death benefits from pensions.

 

From April 2015, no tax charge will be applied to pensions or drawdown funds if the planholder dies before age 75.  After age 75, pension and drawdown funds may be inherited by a beneficiary.  The beneficiary may then take unlimited withdrawals which would be taxed at their marginal rate.  This is a significant improvement on the current system where a charge of up to 55% applies.

 

Stamp Duty Land Tax (SDLT)

 

In a surprise announcement, the Chancellor has reformed the unpopular stamp duty system for residential property transactions.  With immediate effect, the following rates will apply:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unlike the old system, which operated on a cliff edge basis, the new system will apply tax across the bands and should reduce tax for 98% of transactions.

 

Commercial property transactions are not affected by the new rules.

 

Land and Building Transaction Tax (LBTT)

 

Although not part of the Autumn Statement, it is important to remember that the Scottish Government will be responsible for the taxation of Scottish property transactions from 1st April 2015.  From that time, property transactions will be subject to Land and Building Transaction Tax (LBTT) and the following rates will apply to residential property transactions:

 

 

 

 

 

 

 

 

 

 

 

 

The following table compares the tax payable under the old and new stamp duty systems, as well as the Scottish LBTT which will be introduced in April 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From April 1st, people buying properties for less than £254,000 will pay less tax in Scotland than they would in the rest of the UK.  Those that buy properties for more than £254,000 will pay more tax.  We expect to see a flurry of activity before April in the £250K+ property market as people look to secure the most favourable tax terms.

 

Summary

 

Overall, we welcome the changes announced in the Autumn Statement.

 

This article only intends to cover the issues that will affect the majority of our clients.  A number of other changes were announced in niche areas and we will cover these individually with our annual review clients.

 

If you would like to discuss any of the changes, please get in touch.

 

 

 

 

 

Autumn Statement 2014

Purchase price Rate of SDLT on each band
Up to £125,000 0%
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1,500,000 10%
Above £1.5m 12%
Purchase price Rate of LBTT on each band
Up to £135,000 0%
£135,001 to £250,000 2%
£250,001 to £1m 10%
Above £1m 10%
Purchase
price
Tax payable under
old SDLT system
Tax payable under
new SDLT system
Tax payable under
new LBTT system
£130,000 £1,300 £100 Nil
£250,000 £7,500 £2,500 £2,300
£500,000 £20,000 £15,000 £27,300
£750,000 £30,000 £27,500 £52,300
£1,000,000 £50,000 £43,750 £77,300
£2,000,000 £140,000 £153,750 £197,300

 

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