RegulationDec 3 2014

What has the Autumn Statement done for us?

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The changes to stamp duty were the biggest talking point, blowing out of the water Labour’s proposed mansion tax on properties worth £2m or more.

Citing the existing regime as a burden that “has increased on low and middle-income workers in the UK”, chancellor George Osborne said it was time that there was a fundamental change in the way it is calculated.

There will be a tiered rate from now on, with no tax payable on properties up to £125,000 and up to 12 per cent for properties worth £1.5m and above. With the measure being implemented from midnight tonight (3 December), anyone who has exchanged but not yet completed can choose which stamp duty regime they wish to use. This will also apply to Scotland until April 2015.

Housing pledges might also please both borrowers and lenders, with the chancellor stating there are more homes in the offing, with him committing to measures to support up to 133,000 homes.

The Isa changes were also hailed as a welcome move, allowing spouses to inherit their deceased partner’s Isa, with the tax status - although as Adrian Walker, retirement specialist for Old Mutual suggested, this is odds with the abolition of the death tax on pensions.

Under this proposal, pension savings can be passed on to a wider range of beneficiaries and for the inherited pension to be passed on through multiple generations potentially free of tax.

He believes it would be worthwhile extending the same benefits to Isa regulations.

There was more good news on tax for earners - there was a long-awaited rise in the income tax threshold for those on the 40 per cent tax band and an increase in the tax allowance to £10,600.

But non-doms might find new measures a little more stringent. The government will increase the annual charge paid by 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 seven out of the past nine 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.

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 also consult on making the election apply for a minimum of 3 years

Other things to note included:

Sovereign Wealth Fund

The government has proposed creating a sovereign wealth fund for the North West of the UK, to invest revenues generated by fracking in the North West.

As early as 2008, commentators were asking why the UK did not have an SWF when other nations, such as Norway, had been running these for years.

In January this year, Norway’s SWF, which was created in 1990, had grown so much due to high oil and gas prices that every person in the country became a theoretical millionaire. It owns roughly 1 per cent of the worlds stocks and the surplus revenue is collected in the government pension fund (global).

However, Professor Philip Booth, editorial and programme director at the Institute of Economic Affairs, called it a misguided move. He said: “The proposed SWF for the North of England is completely misguided. Any shale gas revenues should be used to reduce taxes or government debt.”

Coincidentally, Norway’s $870bn wealth fund today (3 December) announced the findings of a government commission review of its coal, oil and gas investments, which said it needed to strengthen its active ownership to identify those worst climate offenders on a case-by-case basis.

Greater devolution

Will there be more complexity for businesses that work across the UK, given the proposals to give greater devolution to Wales and perhaps Northern Ireland? Elspeth Orcharton, ICAS director of taxation, said: “It’s now clearer that we’re heading for differential devolution, with potential devolution of Corporation Tax to Northern Ireland and confirmed devolution of business rates to Wales. We want to see a cohesive approach to devolution.

“There is a risk that these changes today could create greater complexity for businesses operating across the UK.”

War Loans

After the previous Labour government paid off its Second World War debt, Mr Osborne announced that the UK had finally paid off its debt from the Great War - perhaps in the spirit of the 100 years commemoration of the start of the 1914-1918 war. By 9 March 2015, the 3.5 per cent loan will be redeemed in its entirety at par.

Ian Spreadbury, portfolio manager of Fidelity’s MoneyBuilder Income and Strategic Bond funds, said: “We have been happy holders of the War Loan for some period of time on the basis of two reasons. Firstly, the bond has generated attractive income compared to much lower yielding long maturity gilts. And secondly, there has also been the potential for price appreciation if the government called the instrument, as the bond has been trading below par. Obviously, we are pleased with how this has played out.

“It had been something of a double-edged sword for the government – if yields drop further from here they could have refinanced it at a much lower level, so they’re giving up that option. But with yields close to all time lows, I suppose it is important for them to lock in the benefit now.”

The total amount in issue is £1.9bn and it is the widest held of any UK government bond with more than 120,000 holders. Some 97,000 investors hold less than £1,000 of the issue, while approximately 38,000 investors own less than £100.

Social Venture Capital Trust

Mr Osborne also pledged to launch a consultation in 2015 on the introduction of a Social Venture Capital Trust. Patrick Reeve, managing partner of Albion Ventures, said: “We believe an evergreen, quoted structure, similar to a VCT, could prove popular among retail investors who are keen to see their money used to encourage positive social results.

“However, the tax breaks will need to be thought through carefully in order to compensate for the inevitably modest investment returns and should encourage the very long investment profile that social projects deserve.”

NS&I and Pensioner Bonds

At Budget 2014, National Savings and Investment was set a net financing target of £13bn for 2014-15, within a range of £11bn to £15bn.

During the Statement today, the chancellor announced a small upward revision to the forecast net contribution to financing from NS&I of £0.5bn to £13.5bn, remaining within the range set at Budget 2014.

The target provided for an increase in the Premium Bond limit from £30,000 to £40,000 from 1 June 2014, and the launch of two fixed-rate market leading savings bonds for people aged 65 and over from January 2015. Interest rates on these bonds will be confirmed on 12 December 2014.

Fines and Levies

The chancellor continued in the same vein as in past Budgets and Autumn Statements by committing to using fines from Libor fixing to go to “good causes”. They will continue to support military and emergency service charities, and will also help to buy helicopters for the Great Western and Kent, Sussex and Surrey Air Ambulance.