A summary of some of the Chancellor’s key announcements for private clients in his Autumn Statement of 3rd December 2014.
Additional exemptions from inheritance tax
The estates of humanitarian aid workers and members of the emergency services who die while responding to emergencies (or from injuries sustained in doing so) will be exempt from inheritance tax. This exemption is an extension of that which already applied to members of the armed forces who die on active duty and will be effective for all deaths on or after 19th March 2014.
With immediate effect, all decorations and medals awarded to armed services or emergency services personnel and awards made by the Crown for achievements and service in public life will be exempt from inheritance tax.
Increased remittance basis charge
For remittance basis users who have been UK resident in at least 7 of the last 9 tax years, the charge remains the same (£30,000). For those resident in at least 12 of the last 14 tax years, it rises to £60,000, and a new charge of £90,000 will apply to those who have been UK resident in at least 17 of the last 20 tax years. The new charges will take effect from 6th April 2015.
Annual Tax on Enveloped Dwellings (ATED)
The rate of ATED on residential properties worth over £2million will increase by 50% above inflation, giving the following charges for the period 1st April 2015 to 31st March 2016:
- Property worth £2-5million – £23,350
- Property worth £5-10million – £54,540
- Property worth £10-20million – £109,050
- Property worth over £20million – £218,200.
The reporting requirements for ATED are also to be simplified.
Individual Savings Accounts (ISAs)
ISA allowances will be transferable between spouses on death (applicable from 6th April 2015, for deaths on or after 3rd December 2014). The annual ISA allowance will also rise to £15,240 in the tax year 2015/16.
The personal allowance for income tax will increase to £10,600 and the higher rate threshold will rise to £42,385 from April 2015.
Capital gains tax (CGT)
Entrepreneurs’ relief is to be extended to gains deferred into investments qualifying for Enterprise Investment Schemes (EIS) and Social Investment Tax Relief (SITR) with effect from 3rd December 2014. Gains deferred after this date will be eligible for entrepreneurs’ relief when they come back into charge i.e. on disposal of the EIS or SIRT investment, and so taxed at 10%. Gains deferred before 3rd December 2014 will be taxed at the usual rate (18%/28%).
From 3rd December 2014, no entrepreneurs’ relief will be available on the value of ‘goodwill’ on a transfer of a business to a company related to the transferor.
The government has dropped plans to introduce a single nil rate band to be shared by all trusts created during a settlor’s lifetime. However, its wider plans to simplify the way inheritance tax applies to trusts continue.
For more information on the tax changes in the Autumn Statement, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a partner in the Private Client team.