This week Chancellor George Osborne revealed his financial plan in a speech made up of an Autumn Statement and a Spending Review. It included a significant change of tactics – by scrapping his recent plan to cut tax credits. Many of the changes were previously announced, but the tax changes are summarised below by Bryan Elkins, Spofforths Tax Consultant…
Tax Credits: Following the recent discussions in the House of Lords, the Chancellor has just announced that the proposed cuts to Tax Credits will no longer take place. Tax Credits will be phased out as previously announced with the introduction of the Universal Credit. The tax credit taper rate and thresholds therefore remain unchanged.
State Pension: The basic state pension will rise to £119.30 from April 2016 – an increase of £3.35
Stamp Duty – Buy to Let Properties : Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be 3 percentage points above the current SDLT rates. This is likely to have significant impact on those seeking to build up investment property portfolios.
In addition, the government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017-18.
Anti-Avoidance: Increased penalties of 60% of tax due announced for all cases challenged successfully by HMRC under the recent General Anti Abuse Rule.
Small Business Rate Relief: To be extended for a further 12 months to assist small businesses.
Digital Tax Accounts: Further confirmation that by the end of the decade we will all have our own “digital tax account” with HMRC. Intended to give greater certainty to taxpayers about the tax they owe. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology.
Capital Gains Tax on Residential property: From April 2019, we will have to account and pay any CGT due on the sale of a residential property within 30 days. Currently this is included in the Tax Return and paid on the 31 January after the end of the relevant tax year. This will therefore significantly advance the payment of this tax and require individuals to get immediate advice on how to calculate any taxes arising.
Farmers Averaging of Profits: In March the Government announced the consultation on farmers averaging may be extended for 2 year to 5 years. Following consultation this is now to be introduced from April 2016 with Farmers having the option of averaging either period.
Apprenticeship Levy: The government will introduce the apprenticeship levy in April 2017. It will be set at a rate of 0.5% of an employer’s pay bill and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any pay bill in excess of £3 million.
Simple Assessment: Draft legislation will enable a new, simpler process for paying tax. This will be used for taxpayers in self-assessment who have simple tax affairs where HMRC already holds all the data it needs to calculate the tax liability, and where existing payment processes are not available. Taxpayers will be sent a calculation which will be a legally enforceable demand for payment, and taxpayers will be able to challenge and appeal these calculations. This process will come into effect in the 2016-17 tax year.
For further information, please contact Bryan Elkins, Spofforths Tax Consultancy Services
Email: bryanelkins@spofforths.co.uk
Tel: 01403 253 282