Moira McMillan, Chiene + Tait Tax Director runs through the Autumn Statement highlights and the impact on individuals and businesses.
On 5 December, long after the last of the leaves had been blown off the trees, George Osborne delivered his 2013 “Autumn Statement”. The Chancellor was generally up-beat and declared Britain was back on track thanks to the government’s austerity plan. He stressed the need to secure the economy for the long-term and there was much talk about fairness – those with the most in society must make a fair contribution.
The Autumn Statement was swiftly followed by the publication of draft clauses for the 2014 Finance Bill and various consultation documents setting out more detail of the announcements made in the speech. As we have come to expect, many of the measures announced will not come into force for some years yet. Highlights for businesses include tax incentives for employee ownership trusts and the scrapping of employers’ National Insurance Contributions for workers under 21.
The most significant announcements, however, were on the personal tax front. It had been widely leaked that the Chancellor was planning to extend the charge to capital gains tax to gains realised by non-residents in respect of residential properties held in the UK. This was doubtless targeted at wealthy foreign buyers who have caused a property bubble at the high-end of the London residential market, but it will also impact on non–resident expatriates who are currently able to escape UK capital gains tax on UK property as long as their non-residency period spans at least five complete tax years. It is proposed that the charge will apply from April 2015 but the draft legislation for this has still to be published and is not expected until late January.
Another measure affecting residential property, which came right out of the blue in the Autumn Statement, concerns the capital gains tax Principal Private Residence (PPR) relief available on the sale of an individual’s main residence. It has long been the practice that the final three years of ownership will qualify for PPR relief, even though the individual may not be living in the property at the time. This period is to be cut in half to eighteen months for disposals of properties where contracts are exchanged after 5 April 2014. There are exceptions for the disabled or those in residential care and where these exceptions apply, the period will stay at thirty six months. It remains to be seen whether this might invoke a rise in sellers looking to exchange contracts before April. The original thirty six month period will stand where contracts are exchanged before 6 April 2014, as long as the sale completes by 5 April 2015.
The state pension is to rise by £2.95 per week from April but there is a bigger rise in the age on which the state pension can be claimed in the future. This is part of the most radical overhaul of the state pension since its inception and is likely to see workers who are currently aged 31 or under having to wait until they are 69 or 70 to claim their entitlement. The Chancellor stated that this was linked to increased life-expectancy – the idea being that no one spends more than one third of their adult life in retirement.
The Chancellor also announced a one-off opportunity for anyone who reaches state pension age before 6 April 2016 to buy extra credits to boost their pension entitlement. How much it will cost to get the extra credits has still to be announced, but it should be noted that anyone who has already retired will also be able to take up this offer.
The draft legislation published after the Autumn Statement ran to 673 pages – this is before looking at the myriad of consultation documents etc. There will be plenty to keep the tax adviser busy during 2014!