Rebuilding Britain into the digital age
As the Chancellor took to the floor to kick-start his third Budget statement of 2015, many were anticipating some shift in the proposed cuts to tax credits.
However, in what has to be the headline announcement – and perhaps the biggest surprise – we got a complete U-turn instead. Those individuals who rely heavily on tax credits will be hugely relieved to hear of the change – but they may not be out of the woods just yet. They will need to have one eye on the impact on their pockets of Universal Credit when it is rolled out towards the end of the Parliament.
There were very few announcements to personal taxation this time round, which many will welcome given the raft of changes already announced in the Chancellor’s previous two speeches this year.
What we did see was a new capital gains tax payment window that will be introduced with effect from April 2019. This will mean any tax due following the sale of a residential property (excluding main residences) will be have to be paid within 30 days of disposal, and in many cases this will accelerate the tax payment date by more than a year.
Property investors and second home owners in the rest of the UK will face a 3% increase in Stamp Duty Land Tax on properties valued at above £40,000 from 1 April 2016. It will be interesting to see if the Scottish Government follows suit when the Scottish finance secretary, John Swinney, reveals his draft budget 2016/2017 next month.
For savers, there was no new pot of gold at the end of the rainbow. The introduction of the new tax free Personal Saving Allowance is still on track to be introduced next April. This will result in the first £1,000 of interest earned on savings being tax free for basic rate tax payers and £500 tax free for higher rate tax payers. The Chancellor also confirmed that the government will maintain the ISA, Junior ISA and Child Trust Fund annual subscription limits at their current level for 2016-17 at £15,240 and £4,080 respectively.
Pension savings were also noticeable absent, with the Chancellor confirming that further announcements will be made in his 2016 Budget speech following the recent consultation on pensions’ tax relief.
Finally as we move into the digital age, the Chancellor confirmed that government will be investing £1.3 billion into transforming HM Revenue & Customs into one of the most digitally advanced tax administrations in the world.
This will result in self-employed individuals, landlords and individuals with secondary income in excess of £10,000 having to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping. The government will publish its plans to transform the tax system shortly and will consult on the details in the next 12 months.
And for those who are unable to or lack confidence in using online systems, its to be hoped that HMRC will retain sufficient capacity in the ‘old way of doing things’ to give them the support they need.
Bruce Saunderson is investment wealth leader, PwC in Scotland