The Autumn Statement 2016: What this means for private clients
It was Theresa May's first Autumn Statement as Prime Minister, Philip Hammond's first as Chancellor of the Exchequer and the UK's first since the referendum confirming that the UK will be leaving the EU. However, there wasn't much in terms of "firsts" for the content of the Autumn Statement itself, with many measures being known about already. It doesn't seem as though Mr Hammond consulted our wish list of what we wanted to see for our private clients.
So what did we learn and what are the things that individuals need to be aware of?
Non-Domicile Tax Changes
The proposed taxation changes for non-domiciled individuals will still be happening in April 2017 although we await details in the draft legislation. It was confirmed that non-doms will be deemed domiciled for all UK tax purposes if they have been resident in the UK for 15 out of the past 20 years or were born in the UK with a UK domicile of origin. Furthermore, Inheritance Tax will now be charged on UK residential property owned directly or indirectly (through a company or trust) by a non-dom.
Stamp Duty Land Tax
Some had speculated that the 3% surcharge for “additional” residential properties would be scrapped. Others thought that there would be changes to address the way the surcharge can impact on “hard” cases such as:
- where parents help adult children to buy their first property
- on leasehold extensions
- on transfers of shares in mortgaged properties between married couples
but nothing has changed.
The most we can expect is the revised Guidance Note that is due out before the end of November to replace the 16 March 2016 Guidance Note. From what we have seen, the revised document will be much clearer as to the way the replacement of the only or main residence exemption works. It will not answer all of the questions and its length (the draft we commented on ran to 39 pages) demonstrates the complexities of the way in which it has been chosen to structure the surcharge.
Other key points for individuals are:
- from April 2017 the income tax personal allowance will rise to £11,500, and the higher rate threshold will rise to £45,000. In addition, it was confirmed that the Government would meet its commitment to raise these to £12,500 and £50,000 respectively by the end of the current Parliament;
- the Government confirmed (as originally announced in the Budget 2016) that the ISA limit will increase from £15,240 to £20,000 in April 2017 – a good measure for those thinking about saving for the future;
- in another bid to encourage saving, a new three-year savings bond will be available through NS&I from spring 2017. This will allow individuals to invest between £100 and £3,000, and the Government hopes that this bond will offer a "market-leading" rate of 2.2%. Whether such a rate is possible (and whether it will indeed be "market-leading" at the time) remains to be seen;
- the Government will phase out the tax and National Insurance advantages of certain salary sacrifice schemes from April 2017. Arrangements relating to pensions, childcare, ultra-low emission cars and the cycle to work scheme will not be subject to this change. Salary sacrifices are currently used by employers to provide a range of benefits to employees, such as gym memberships and company cars;
- the Government will consult on scrapping letting agency fees charged on new and existing tenants, with the intention that such fees will be banned "as soon as possible" – renters are already looking forward to the saving, with many likely to apply it towards getting on the property ladder;
- the Annual Tax on Enveloped Dwellings charges will rise in line with inflation for the 2017/18 chargeable period (having remained the same for 2015/16 and 2016/17); and
- the Government has recommitted itself to the pledge made in its March 2016 "business tax road map" to reduce Corporation Tax to 17% by 2020.
The Autumn Statement didn't cause many waves itself but there is a lot for individuals to keep looking out for. The first draft legislation on non-doms is expected in early December, hot on the heels of the much-needed updated guidance about the reach and ramifications of the Stamp Duty Land Tax surcharge. With the somewhat gloomy forecast presented for the economy over the next few years, it remains a good time for people to be thinking about how best they can plan for the changes and uncertainties of the future.
For advice on your own situation, please contact your normal Blake Morgan adviser.