George Osborne has delivered his annual Autumn Statement today which was combined with the latest Spending Review which delivered £12bn of welfare spending cuts and slashed departmental budgets across Whitehall.
The biggest surprises were an about turn on the planned changes to tax credits, which were abandoned altogether; the maintenance of police spending despite widespread expectations their budgets would be cut and buy-to-let investors will now pay higher stamp duty rates than those intending to live in their homes.
Importantly there were no ‘big announcements’ on pensions and our fear that the Chancellor would tinker with higher rate tax relief proved unfounded, at least for now.
Existing state pensions will enjoy the largest increase for over a decade as their pension income will rise by £3.35 a week to £119.30 a week for a single person in April 2016.
The full rate for the new state pension, being introduced for new pensioners from April 2016, was announced at £155.65 a week although in reality we don’t think many people will be entitled to that level as the amount will be adjusted to take into account any period of ‘contracting out’, which will result in a reduced payment. The easiest way to determine your likely state pension is to ask for a forecast, which we can help you with if required.
The ‘triple lock’ will be continue unchanged and state pensions will continue to increase by the largest of Retail Prices Index (RPI), average earnings or 2.5%.
For auto enrolment schemes, increases in the minimum contribution rates have been put back to fall in line with the tax year. The Minimum will go up from 2% to 5% in April 2018 rather than October 2017, and from 5% to 8% in April 2019 instead of October 2018.
Your tax return
All individuals and small businesses will need to submit their tax return on-line by the end of this decade.
Buy to let properties
There were two significant changes to this popular investment. Any capital gains tax due following the sale of a property will need to be paid within 30 days of the sale, rather than in line with an individual’s normal tax return.
Furthermore from April 2016 stamp duty – the tax paid when you buy a residential property – will be 3% higher for buy to let property in comparison to homes to be lived in by the owner. This will also apply to second homes.
|Buy to let & second homes
|Up to £125,000
|£125,000 to £250,000
|£250,000 to £925,000
|£925,000 to £1.5m
A new London Help to Buy scheme was announce and the Government will provide an interest free loan of up to 40% on new build homes where the buyer has a deposit of 5%
‘Crowdfunding’ will be available as an ISA investment; the small business rate relief scheme is being extended for another year and council tax bills are likely to rise to help fund long term care costs.
We’re pleased there were no further changes to pension legislation although, as noted above, we feel it remains likely that higher rate tax relief will be subject to some changes sooner rather than later.
The changes to buy to let property taxation is interesting because, certainly in the South of England, this asset class has been a remarkable investment for many people. Only time will tell whether it will result in making houses more affordable for those who wish to actually live in them which surely is the Chancellors objective.
Quite how the Capital Gains Tax on property rules will work in practice remains to be seen; one assumes the transaction will become the responsibility of the conveyancing solicitor in the same way stamp duty is.
We’re sure the Spring 2016 budget will be upon us soon enough but in the meantime if you have any questions please get in touch.