As always at Speed Financial Solutions, we like to keep abreast of all the changes going on back in the UK. For us it’s crucial, because we offer advice to many people who may spend a lot of time abroad throughout the year, but still have assets and financial connections to the UK.
Whilst reading through the 108 page document (what else would I be doing on a December Saturday morning?!) I came across the information I was specifically looking for to help guide our expats, but I also came across other, less obvious information that I’m including below that I want to share with you that may not necessarily have hit the news headlines. I’ve laid out in bullet points for ease, and where appropriate I have used the actual wording from the Budget Statement.
Restricting entitlement to the personal allowance for non-residents – At Budget 2014 the government launched a consultation on whether or not to restrict the Income Tax personal allowance for non-residents. The government will continue to discuss implementation of this change with stakeholders. Should the government decide to proceed, a more detailed consultation will be undertaken. No change will come into effect before April 2017.
THIS IS PARTICULARLY IMPORTANT IF YOU HAVE RENTAL PROPERTY IN THE UK, AS CURRENTLY YOU ARE ABLE TO UTILISE YOUR UK PERSONAL ALLOWANCE TO OFFSET YOUR UK TAX LIABILITY. ASK SPEED FINANCIAL SOLUTIONS FOR MORE INFORMATION ON HOW THE CHANGES MIGHT AFFECT YOUR OWN TAX SITUATION.
Personal allowance – At Budget 2014, the government announced that the personal allowance will be increased to £10,500 from April 2015. The personal allowance will be increased by a further £100 in 2015-16 to £10,600. In addition, the higher rate threshold will increase by inflation (1.2%) in 2015-16 for the first time in 5 years, so that the full gains of the increase in the personal allowance are passed on to higher rate taxpayers. The increase in 2015-16 will be worth £120 to a typical basic rate taxpayer and £172 to a typical higher rate taxpayer.
Individual Savings Accounts (ISAs): transfer to spouses on death – 150,000 married ISA savers pass away each year, and their ISA tax advantages die with them, even if they were saving as a couple. From 3 December 2014, if an ISA saver in a marriage or civil partnership dies, their spouse or civil partner will inherit their ISA tax advantages. From 6 April 2015, surviving spouses will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance, and so will be better able to secure their financial future and enjoy the tax advantages they previously shared.
ISAs: new annual subscription limits – At Budget 2014, the government made the largest ever increase in the individual savings accounts (ISA) allowance to £15,000, nearly trebling the limit for cash ISAs. From April 2015, the ISA allowance will rise to £15,240. The government will increase the ISA, Junior ISA and Child Trust Fund annual subscription limits in line with the Consumer Price Index (CPI). The 2015-16 ISA limit will be increased to £15,240. The Junior ISA and Child Trust Fund limits will both be increased to £4,080.
PLEASE REMEMBER, THAT WHAT IS TAX EFFICIENT IN ONE COUNTRY IS NOT NECESSARILY TAX EFFICIENT IN ANOTHER, ISAs ARE NOT TAX EFFICIENT WHEN YOU LIVE ABROAD… IN FACT, THEY ARE QUITE THE OPPOSITE. THERE ARE ISA EQUIVALENTS AVAILABLE TO YOU WHEN YOU LIVE OUTSIDE THE UK – CONTACT SPEED FINANCIAL SOLUTIONS FOR MORE INFORMATION.
Stamp Duty Land Tax – The existing system of SDLT creates distortions in the housing market which can lead to unfair outcomes. SDLT is currently charged at a single rate on the whole purchase price of a property, with different rates for different value bands. This structure means that a disproportionate number of transactions occur just below the value band thresholds and it is unusual for property to be bought or sold at prices just above the threshold levels.
From 4 December 2014, SDLT rates will only apply to the part of the property price that falls within each band, similar to the structure of Income Tax. The effective rate of SDLT will rise steadily as property values increase, removing the distortions created by the existing system, where the amount of tax due jumps at the thresholds.
Pensions Flexibility – Budget 2014 announced a radical set of reforms that will give people more choice over how they access their defined contribution pension (typically personal pensions and SIPPs). From April 2015, savers will be able to access their defined contribution pension as they wish at the point of retirement, subject to their marginal rate of Income Tax, instead of the current 55% charge for full withdrawal.
CARE: PENSIONS FLEXIBILITY: £10,000 ANNUAL ALLOWANCE – AS ANNOUNCED ON 21 JULY 2014, THE GOVERNMENT WILL INTRODUCE A REDUCED ANNUAL ALLOWANCE OF £10,000 FOR MONEY PURCHASE PENSION CONTRIBUTIONS FOR INDIVIDUALS WHO HAVE FLEXIBLY ACCESSED A PENSION FROM 6 APRIL 2015.
ACCESSING MORE OF YOUR PENSION COULD LEAVE YOU EXPOSED TO UNNECESSARY INHERITANCE TAX – ASK SPEED FINANCIAL SOLUTIONS FOR MORE INFORMATION. OF PARTICULAR INTEREST IS THE UK TREASURY’S OWN ESTIMATE OF THE INCREASE IN TAX REVENUE AS A RESULT OF THE NEW FLEXIBILITY, WHICH ESTIMATES £320 MILLION EXTRA TAX NEXT YEAR AND ALMOST £4 BILLION OVER THE NEXT FIVE YEARS.
TAX CHARGE ON INHERITED PENSIONS
Income: From April 2015, beneficiaries of individuals who die under the age of 75 with remaining uncrystallised or drawdown defined contribution pension funds (typically personal pensions and SIPPs) or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free where 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.
Lump Sums: If the individual dies before age 75, the beneficiary will pay no tax on the funds. 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 lump sum payment. Lump sum payments will be charged at the beneficiary’s marginal rate from 2016-17. (Finance Bill 2015)
CARE: ALTHOUGH ANNUITIES OFFER A GUARANTEED LEVEL OF INCOME FOR LIFE, ANNUITY RATES ARE AT AN ALL TIME LOW. GONE ARE THE DAYS OF BEING ABLE TO BUY AN ANNUITY AT 10% AND ARE NOW TYPICALLY PERCEIVED AS OFFERING POOR VALUE FOR MONEY. SPEAK TO SPEED FINANCIAL SOLUTIONS TO FIND OUT WHETHER AN ANNUITY IS THE BEST OPTION FOR YOU.
Pensions flexibility: small pots rules – As announced on 21 July 2014, the government will continue the small pots rules for withdrawals from defined contribution pension savings from 6 April 2015. These rules allow individuals to take up to 3 small pension pots from non occupational schemes, or an unlimited number from occupational schemes, of up to £10,000 as a lump sum without being subject to a reduced annual allowance of £10,000. The government will also lower the age at which an individual can make use of these rules from 60 to 55 from 6 April 2015.
Pensions tax relief: the age 75 rule – Following informal consultation since Budget 2014, the government has decided not to make changes to the age limit at which tax relief can be claimed on pension contributions. This will remain at age 75.
TAX EVASION AND FRAUD – ENSURING A FAIR CONTRIBUTION
Building further on its pursuit of avoiders, Autumn Statement announces the government’s plans to respond to those who act with disregard to the rules and who engage in abusive arrangements. HMRC will consult in early 2015 on introducing further deterrents for serial tax avoiders and on penalties for tax avoidance cases where the General Anti-Abuse Rule applies.
Tackling tax avoidance– Since 2010, the government has taken strong and sustained action to tackle avoidance. It is not acceptable for a small minority not to pay their fair share, and the public rightly expects the government to be firm. The measures taken so far this Parliament to tackle aggressive tax planning, avoidance and evasion add up to £7.6 billion in additional revenues in 2015-16. This includes the OBR’s updated forecast for money from the UK-Swiss tax agreement.
Enhancing financial incentives for offshore intelligence – HMRC will review its existing framework for offering financial incentives for information on offshore tax evaders, in particular those who remain outside the reach of international efforts to achieve tax transparency.
Inheritance Tax and trusts – Following consultation launched after Budget 2014, 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 rules. (Finance Bill 2015)
Strengthening civil deterrents for offshore tax evasion – Following consultation, the government will introduce legislation on enhanced civil penalties for offshore tax evasion. This will amend the existing offshore penalties regime to:
include IHT
apply to domestic offences where the proceeds of non-compliance are hidden offshore
update the territory classification system to reflect the jurisdictions that adopt the new global standard of automatic tax information exchange
include a new aggravated penalty of up to a further 50% for moving hidden funds to circumvent international tax transparency agreements
The changes will come into effect from April 2016, except for the aggravated penalty which will come into effect following Royal Assent. (Finance Bill 2015)
MARKETED AVOIDANCE SCHEMES
Promoters of tax avoidance schemes – Following consultation, the government will update and further clarify the legislation covering ‘high risk’ promoters of tax avoidance schemes, ensuring that the 2014 legislation functions as intended. The changes will include a broader range of connected persons under the common control of a promoter in the regime and clarify the time limits within which HMRC can issue conduct notices to promoters who fail to disclose a scheme.
Serial avoiders – The government will consult on action that could be taken to impose additional financial costs, compliance and reporting requirements on repeat users of known avoidance schemes. The government will seek views on whether publishing the names of individuals who have engaged in multiple tax avoidance schemes could contribute to deterrence in this area.
TAX COMPLIANCE AND ADMINISTRATION
Tax administration in developing countries – The government will provide £5 million for HMRC to support capacity building in developing countries, by recruiting a dedicated team of tax experts to help developing countries tackle tax avoidance and evasion, complementing the work of HMRC’s Capacity Building Unit and partnering with the World Customs Organisation, to share expertise and help developing countries implement the World Trade Organisation Trade Facilitation Agreement.
CARE: THE NET IS CLOSING. PLEASE SEE OUR WEBSITE:
WWW.SPEEDFINANCIALSOLUTIONS.COM FOR MORE INFORMATION AND PREVIOUS ARTICLES IN CONNECTION WITH THE AUTOMATIC EXCHANGE OF INFORMATION.
BANKING
Ensuring a fair contribution from business – When a company makes a loss for Corporation Tax purposes, this loss can be carried forward and offset against profit arising in future periods. Many banks operating in the UK have built up exceptionally large carried-forward losses – a result of their performance during the financial crisis and the costs associated with subsequent misconduct and mis-selling scandals. The government considers it unreasonable that these losses are now being used to eliminate tax on current profits. Corporation Tax receipts from the banking sector have already fallen from £7.3 billion in 2006-07 to £1.6 billion in 2013-14, and it is unsustainable that some banks will not be making Corporation Tax payments for another 15 to 20 years. Autumn Statement announces that the government will therefore restrict the amount of banks’ profits that can be offset by carried-forward losses to 50%, increasing banks’ contribution to fiscal consolidation through Corporation Tax payments.
THE BANKS HAVE HAD IT GOOD FOR TOO LONG AT THE COST TO SAVERS … ASK SPEED FINANCIAL SOLUTIONS TO UNDERTAKE A REVIEW OF YOUR CURRENT SAVINGS AND INVESTMENTS TO ENSURE THAT YOUR FINANCES ARE SET UP IN THE BEST POSSIBLE WAY.
Air Passenger Duty– The government will exempt children under 12 from Air Passenger Duty on economy tickets with effect from 1 May 2015, and will extend the exemption to include children under 16 from 1 March 2016. This will help to reduce the cost of holidays for families by up to £71 per child.
This announcement builds on the changes announced at Budget 2014, which reduced the cost of flying to countries over 4,000 miles from London, and froze short-haul Air Passenger Duty. Together, these changes mean that 99% of passengers will see a freeze or cut in Air Passenger Duty in 2015-16. The government believes that these tax changes should be clear and visible to consumers. The government will therefore consult on an amendment to pricing regulations which would require airlines to separate out Air Passenger Duty from their other fees and charges.
USEFUL INFORMATION FOR EXPATS WHO TRAVEL BACK TO THE UK REGULARLY AND/OR HAVE CHILDREN/GRANDCHILDREN VISITING.
Mental health – An estimated 44 million people currently live with dementia around the world and this figure is set to more than triple by 2030. There has been little success to date in finding a cure or a disease-modifying treatment for dementia: only 3 new drugs have entered the market in the past 15 years. The Autumn Statement announces that the government is investing at least £15 million into new and pioneering areas of research into dementia. Harnessing innovation may help to find a treatment for the disease.
A WELCOME STATEMENT FOR THOSE WHO HAVE EXPERIENCE OF THIS TERRIBLE ILLNESS.
CULTURE AND HERITAGE
Great Exhibition – The government will provide £1 million to fund a Great Exhibition in the north, which will celebrate the great art, culture and design of the north.
The Factory Manchester: new theatre and exhibition space – The government will provide £78 million of capital funding towards the construction of a new theatre and exhibition space in Manchester called ‘The Factory Manchester’. This will provide a valuable resource for the community.
First World War Arts projects – The government will provide £3 million towards First World War commemoration art projects, primarily in northern cities.
WHAT CAN I SAY? … I’M A LANCASHIRE LASS – GREAT NEWS FOR FELLOW NORTHERNERS!
Church Roof Repair Fund – The government will provide £15 million for a new Listed Places of Worship: Roof Repair Fund, available across the whole of the UK, to support the maintenance of church roofs in 2015.
NICE TO SEE THESE HISTORIC BUILDINGS FINALLY RECEIVING SOME FINANCIAL TLC.
I do hope that you have found this roundup informative. There’s a mixed bag of information in here, so if you would like further clarification on any of the items mentioned please do contact us at www.speedfinancialsolutions.com (Tel 951 315 271 or 951 318 529) – we are happy to discuss your own situation in more detail. One of our advisers will be happy to come and spend some time with you either in your home or at our office to explain and go through your options, so do call to make an appointment.
Andrea Speed Principal Speed Financial Solutions 13 December 2014