What didn’t happen may be more interesting than what did
Despite the huge press coverage around the Chancellor’s U-turn on Tax Credits, this was a quiet Autumn Statement for personal tax matters.
This is perhaps not surprising given the significant changes announced on dividend tax and pensions in the Summer Budget which will take effect in April 2016. Perhaps what is more interesting is what didn’t happen rather than what did.
The Chancellor confirmed that he will be re-examining all pensions matters in the March 2016 Budget and we could see yet more changes heaped upon the already significant upheaval in pension tax relief and access to funds.
This could involve restrictions in higher rate tax relief on contributions or even a move to removing tax relief on the way in but providing tax free access on extraction from pension funds. The fact that there were no new announced changes to pensions perhaps gives further opportunity to higher rate taxpayers to utilise the tax reliefs still available.
Announcements were anticipated on the availability of Entrepreneurs’ Relief with some predicting either a restriction in the £10 million lifetime limit or an increase in the tax charge from 10% to 15%.
In the event, neither happened and there is perhaps a glimmer of hope that some of the legislation introduced earlier this year to limit the availability of Entrepreneurs’ Relief will be revised.
The new legislation was introduced to prevent relief from being available in respect of certain “contrived arrangements” but was drawn widely enough to catch genuine commercial transactions. It is welcome news to see that the Government is to consider a fairer re-drafting of the rules.
So much for what did not happen. Let us examine what did.
The Statement re-emphasised the government’s intention to increase the personal allowance to £12,500, before which higher rate income tax is charged to £50,000 by the end of this Parliament.
Further detail was announced on making tax administration digital. This is part of the move to bring an end to tax returns and instead ensure a more fluid and ongoing tax relationship between HMRC and the taxpayer.
This is logical and anything which helps to improve speed of service using available technology is to be welcomed. Perhaps of more concern to some is the signpost of shortening time limits for tax payments on taxable transactions. For instance, from April 2019, capital gains tax payments will be required to made on the sale of second homes and buy-to-let residential properties within 30 days of disposal rather than the 31 January following the end of the tax year which is what happens now.
The government is also looking at speeding up the time limits for other taxes and we will need to watch developments as they unfold.
In a surprise announcement, the Chancellor will introduce legislation to charge 3% extra Stamp Duty Land Tax on purchases of second homes and buy to let properties from April 2016.
Of course this will not impact purchases of residential property in Scotland, as the new Land and Buildings Tax has been devolved to the Scottish Parliament from April this year. It will be interesting to see if John Swinney makes any announcements in this area when he presents the Scottish Government’s spending plans on 16 December.
Peter Young is Tax Partner in the Edinburgh Office of Johnston Carmichael