Autumn statement 2014

1. Autumn Statement 2014
welcome

2. The Autumn Statement
Introduction
⧁ This week the Chancellor delivered his last Autumn Statement in this
parliament before the general election in May 2015. It sets out the next stage
in the government’s long term economic plan and brought in new changes
that impact on many personal and corporate finances.
⧁ This note summarises the main changes to tax rates and allowances for
individuals, companies and trustees. It should be used as a guidance only
document and not considered as financial advice.
Income Tax
⧁ The tax-free personal allowance will rise to £10,600 from 6 April 2015. This
represents an extra £100 increase over the previously announced figure of
£10,500.
⧁ Higher rate tax threshold will rise to £42,385 from 6 April 2015, the first time
this threshold has been raised in line with inflation for five years.
⧁ Additional rate tax threshold remains at £150,000.

3. The Autumn Statement
Capital Gains Tax (CGT)
⧁ As previously announced by the Chancellor the annual exempt amount will
rise to £11,100 from 6 April 2015.
Inheritance Tax (IHT)
⧁ No announcements on reviewing the nil rate band (NRB) so the position
remains the same, namely NRB frozen at £325,000 until 2017.
⧁ The government will extend the existing IHT exemption for members of the
armed forces whose death is caused or hastened by injury while on active
service to also cover members of the emergency services and humanitarian
aid workers responding to emergency circumstances. It will have effect for
deaths on or after 19 March 2014.
Inheritance Tax and Trusts
⧁ As a result of consultation following the 2014 Budget, the government will
not introduce a single settlement nil-rate band. The government will
introduce new rules to target avoidance through the use of multiple trusts. It
will also simplify the calculation of trust IHT tax. Details are expected in the
Finance Bill 2015.

4. The Autumn Statement
Corporation Tax
⧁ From 1 April 2015, the government will restrict the amount of banks’ profits
that can be offset by carried forward losses to 50%, increasing their
contribution to public finances through their corporation tax payments.
⧁ Again from April 2015 the government is introducing a new tax to counter
certain tax avoidance arrangements where some large multinational
companies divert profits abroad through complicated business structures,
such as the so-called ‘double Irish’, in order to avoid paying taxes. The
‘Diverted Profits Tax’ will apply to a company’s profits that have been
diverted from the UK through complex arrangements such as these, and will
apply to both UK and foreign multinational companies.
⧁ So, if a company conducts a lot of activity in the UK – sales, for example -
but can avoid paying corporation tax by moving profits generated in the UK
to other countries through the manipulation of the international tax rules,
HMRC will now be able to tax those profits at a rate of 25%.
⧁ The government is also looking to stop individuals and partnerships from
gaining an unfair tax advantage by transferring their businesses into a
company they control, and then claiming corporation tax deductions for
assets linked to the business’ reputation and customer relationships.

5. welcome Pensions

6. The Autumn Statement
Pensions
⧁ Further to the announcement on 29 September 2014 the Chancellor has
confirmed that from 6 April 2015, members of defined contribution (DC) pension
schemes will be able to access their pension savings as they wish at the point of
retirement, with income over and above any tax-free cash being subject to their
marginal rate of income tax.
⧁ From 6 April 2015, beneficiaries of individuals who die under the age of 75 with
remaining uncrystallised or drawdown DC pension funds, or with a joint life or
guaranteed term annuity, will be able to receive any future payments from such
policies tax free provided no payments have been made to the beneficiary before
6 April 2015.
⧁ The tax rules will also be changed to allow joint life annuities to be paid to any
beneficiary.
⧁ Where the individual was over 75, the beneficiary will pay the marginal rate of
income tax, or 45% if the funds are taken as a single lump-sum payment. From
2016/17 tax year this will change further and lump sum payments will also be
taxed at the beneficiary’s marginal rate.
⧁ There will be a reduced annual allowance of £10,000 for those with DC schemes
once they have used the new flexibility to access their pension savings from 6
April 2015.

7. The Autumn Statement
Pensions
⧁ Transfers from funded defined benefit schemes to DC schemes will still be
allowed in the context of the new flexibilities.
⧁ The Small Pots rules which allow members of DC schemes to take up to 3
pension pots from non-occupational schemes, or an unlimited number from
occupational schemes up to £10,000, will continue to apply from 6 April 2015.
Individuals will be able to take their small pots without being subject to the
reduced annual allowance of £10,000, nor will they be included for lifetime
allowance purposes. The age at which these small pots can be taken will also be
lowered from 60 to 55 from 6 April 2015.
⧁ Following informal consultation since the 2014 Budget, it has been decided to
keep the age limit at which tax relief can be claimed on pension savings at 75.
⧁ From April 2015 the full Basic State pension will rise by £2.85 a week.
⧁ Methods of assessing means-tested benefits for those over the Pension Credit
qualifying age have changed. Notional income rules applied to pension pots that
have not been accessed, or which have been accessed flexibly, will change from
150% to 100% of the income an equivalent annuity would offer, or the actual
income taken if higher.
⧁ Standard minimum Pension Credit income guarantee will rise in line with the cash
increase in the Basic State Pension.

8. The Autumn Statement
ISAs
⧁ The annual subscription limit will increase to £15,240 from 6 April 2015, and at the
same time the JISA and Child Trust Fund (CTF) subscription limits will increase by
£80 to £4,080.
⧁ As of 3 December 2014, if an investor in a marriage or civil partnership dies, their
spouse or civil partner will inherit their ISA tax advantages. It appears the way this will
work is that, from 6 April 2015, surviving spouses will be able to invest as much into
their own ISA as their spouse used to have, in addition to their usual allowance.

9. Stamp Duty
Land Tax
welcome

10. The Autumn Statement
⧁ Under the old rules stamp duty was paid at a single rate on the entire property price.
With effect from 4 December 2014 stamp duty will increase progressively and tax will
be payable on the part of the property price which falls within each band.
⧁ The new rates and bands are:-
⧁ So from 4 December 2014 the stamp duty payable on a property which sells for
£275,000 will be £3,750, an effective rate of 1.4% and a saving of £4,500 compared
to the previous regime.
⧁ Under the new rules the stamp duty payable will be lower than or equal to that
payable under the old regime for property prices up to £937,500.
⧁ The new rules will apply in Scotland until 1 April 2015, when they will be replaced with
the Land and Buildings Transaction Tax.
⧁ HM Treasury have produced a useful factsheet covering this reform in more detail.

11. The Autumn Statement
National Insurance
⧁ From April 2015, employers will no longer pay National Insurance contributions for
any employees under the age of 21 on earnings up to the upper earnings limit.
⧁ In addition employer National Insurance contributions for apprentices aged under
25 on earnings up to the upper earnings limit will be abolished from April 2016.

12. The Autumn Statement
Miscellaneous
⧁ The government will increase the annual charge paid by some non-domiciled
individuals resident in the UK who wish to retain access to the remittance basis of
taxation. The charge paid by people who have been UK resident for 7 out of the
last 9 years will remain at £30,000, the charge paid by people who have been UK
resident for 12 out of the last 14 years will increase from £50,000 to £60,000 and a
new charge of £90,000 will be introduced for people who have been UK resident
for 17 of the last 20 years.
⧁ The government will extend the doubling of Small Business Rate Relief (SBRR)
for a further year from 1 April 2015.
⧁ Legislation will be introduced, effective from 6 April 2015, to stop investment fund
managers from disguising their guaranteed fee income as capital gains in order to
avoid income tax. This will not affect sums linked to performance, nor returns
which are exclusively from investments by partners.
⧁ Consultation will take place on a proposal to introduce a new power, enabling
HMRC to achieve early resolution and closure of one or more aspects of a tax
enquiry whilst leaving other aspects open.
⧁ UK search and rescue and air ambulance charities will be eligible to claim refunds
on VAT they have paid on purchases of goods and services for their non-business
activities from April 2015.

13. Inevitably, more issues will arise and further details of
changes will emerge as new information becomes
available. In the meantime if you have any questions
regarding any of the above, please speak to your Wealth
Planner.
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result of the contents of this material. Whilst we have made every effort to ensure the
accuracy of this material we cannot accept responsibility for any consequences (financial
or otherwise) arising from relying on it.