The biggest surprise in George Osborne’s speech today, which was only anticipated by only a few, was of course the abolition of the slab system for Stamp Duty Land Tax - welcome news according to the government for a whopping 98 per cent of home buyers.
The progressive rates will apply with effect from midnight tonight (3 December) and anyone who has exchanged a contract but not yet completed will be able to choose whether to use the old or the new system. The introduction of the new system, while an expensive measure for the government, is likely to boost the property market - at least from the demand perspective.
The overall impact is questionable as the sellers’ may be asking how this will interact with impending capital gains tax extension to disposal of UK residential properties by non-UK residents, changes to the Main Residence Relief and also the increase in the yearly charge for “enveloped dwellings” (broadly properties owned via structures involving corporate entities). Draft legislation on these two issues is expected next week.
News that will be welcomed by savers is that Isas can now be passed to a surviving spouse without losing their tax exempt status. Passing down assets to the spouse is generally free from inheritance tax, and with effect from 6 April 2015 spouses of those individuals who die on or after 3 December 2014 will receive an additional ISA allowance up to the amount originally invested by the deceased. The mechanics of this are not yet completely clear.
The Isa annual allowance for 2015/16 will rise slightly to £15,240 for all investors. In addition, saving by way of a pension has also become more attractive with the abolition of a 55 per cent death tax charge on unused defined contribution plans passing to any nominated beneficiary from someone who dies before the age of 75.
Non-UK domiciliaries living in the UK were also affected. While they are allowed to maintain their status, the increase of the remittance basis charge to £60,000 for those who have been living here for more than 12 out of previous 14 tax years.
The introduction of a £90,000 charge for those who have been in the country for more than 17 out of previous 20 years will limit the benefits of the remittance basis to only the very wealthiest UK-based foreigners.
We await further details, particularly on whether it will be possible to opt-out of the regime once you are in it.
The new charges for non-doms were part of the overall government measures aimed at “ensuring fair contribution from individuals” – other measures were the clamping down on some special purpose share schemes, further restrictions on loss relief and the introduction of new and extension of current penalty regimes as part of the government’s move towards increased international cooperation and transparency.
Finally, the Chancellor announced the new rates and allowances for 2015/16 - in particular, the personal allowance and basic rate band both extended - to £10,600 and £32,385 respectively, £100 more than originally anticipated.
There is one piece of good news for non-UK residents – although the government has been consulting on removing their ability to claim personal allowances, no changes will take place until April 2017 at the earliest.