Which of his announcements taxpayers may be interested in will depend on their individual circumstances – some will be interested in the high profile issue of tax credits, whereas others will be concerned with the changes to dividends, residential property and the taxation of non UK domiciled individuals.
With the tax lock already in place, providing that the basic higher and additional rates of income tax will not increase above 20 percent, 40 percent and 45 percent for the duration of the current Parliament and the prospect of the current low 20 percent corporation tax rate falling further to 18 percent by 2020, it is stakeholders who are set for increased tax rates. The Government has already announced that in combination with the abolition of the dividend tax credit, dividend income above the new Dividend Allowance of £5,000 will be taxed at increased rates. In the July Budget policy costing document, it is clear that the Government are anticipating the acceleration of dividend payments prior to this rate increase.
Other changes already announced that are due to take effect from April 2016 include:
Individuals, including those with inadvertent non-compliance in relation to offshore assets (often assets held in complex structures) need to be aware of the closure of Liechtenstein Disclosure Facility from 31 Dec 2015. Whilst we are expecting further information about the ‘last chance’ disclosure facility in the Autumn Statement, it is anticipated that this will not provide the same benefits that the LDF can. Following consultation, we are also expecting further information about the proposed criminal liability charge for failure to disclose overseas assets, regardless of proof of intention.
The Government has consulted on proposals to abolish permanent non-dom status. It is hoped, that in order to allow sufficient time for working up proposals on the complex area of offshore trusts, progress in this area will be delayed until 2016.
The Government continues to use UK residential property as an area from which to raise tax revenues with numerous changes over the last few years including the introduction of ATED, significant increases to SDLT, CGT for non-residents from April 2015 and now restrictions on finance costs such as interest for non-corporate landlords coming into effect from April 2017. In addition a consultation is expected in the New Year on the July 2015 proposals to bring all UK property held through offshore structures by non-domiciles into the scope of UK inheritance tax. With so many changes to the rules around residential property, that impact funding structures and ownership for both existing and new owners we encourage the Government to give due and proper consultation to any proposed changes to ensure their implementation is practically and commercially viable.
In addition, the Pensions Green Paper issued at the Summer Budget asked the question whether the current tax regime for pensions was adequately encouraging individuals to save for their retirement. Whilst there were no proposals, the one example provided was to change the current ‘Exempt, Exempt, Taxed’ system – where contributions into a pension and growth in the pension fund are tax free, and the pension is taxed when taken – to a ‘Taxed, Exempt, Exempt’ system where tax is paid on contributions but growth in the pension fund, along with the pension when taken, is exempt. The Chancellor has already indicated full details of any Government reform will be deferred to next spring.