Autumn Budget 2017 - what does this mean for private clients?
Without question, today's Budget had a clear emphasis on assisting private individuals and business owners in coping with the ever increasing costs of living, home prices and running businesses. The key areas affecting Private Clients are:
One major point that seemed to be at the forefront of the Chancellor's mind was Brexit – how will any deal affect the average person? As the Chancellor noted, the UK is currently at a critical phase of the Brexit negotiations and has allocated £3 billion over the next two years for "Brexit preparations". Although this commitment is encouraging, there still remains a vast amount of ambiguity. How each individual will be affected will certainly be felt on a case-by-case basis.
More tangibly, the Income Tax Personal Allowance is set to increase from £11,500 to £11,850 from April 2018 and the Higher Rate threshold will increase from £45,000 to £46,350 at the same time. This will be a welcomed change but still falls short of the increases promised for 2020-2021.
Stamp Duty Land Tax (SDLT)
Relief from SDLT will be available for first time buyers paying up to £500,000 for a residential property within England, Wales and Northern Ireland completing from today onwards.
First time buyers will pay no SDLT on the first £300,000. If the price is between £300,000 and £500,000 they pay 5% on the amount in excess of £300,000 which is a reduction of £5,000 compared to the amount of SDLT they would have paid under the normal rates regime.
However, if the purchase price exceeds £500,000 then the full rates of SDLT will apply without any relief.
Who are First Time Buyers?
A first time buyer is an individual or individuals who have never owned an interest in residential property in the UK or anywhere else in the world. A first time buyer must also intend to live in the property as their only or main residence.
This definition excludes anyone who has ever owned or had a share in a residential property. This could be an interest in a property anywhere in the world. It would therefore exclude someone who at some time was gifted a share in a family holiday home abroad.
Also, this relief only applies if the first time buyer intends to occupy the property as his or her only or main residence which means that any first time buyer intending to rent out the property will not be entitled to the relief.
What about joint purchasers?
The relief will only apply where all purchasers are first time buyers. So if one purchaser already owns property anywhere in the world, then the relief will not apply despite the fact that the other purchaser(s) is a first time buyer.
There is an issue with a first time buyer who is married or who has a civil partner (assuming they are not separated) if that person at the date of completion owns another property. It is likely that first time buyer's relief will not be available, because the relief is not available if the purchase would be a "higher rates transaction" (the 3% surcharge applies). Advice should be taken here, there are nuances around the 3% surcharge.
The relief applies to property purchases in England, Wales and Northern Ireland where SDLT currently applies. However, the relief will only apply to Wales until 1 April 2018 when SDLT will be devolved to Wales. The relief does not apply to Scotland as SDLT ceased to apply to Scotland on 1 April 2015.
If you would like more information on SDLT, then please do get in touch with either John Shallcross or Lorna Munro and if you would like more information on any wider Private Client matters, then please do get in touch with Elysa Jacobs in the Succession & Tax team.