Autumn Statement 2014: Key Points For Private Clients

Chancellor George Osborne delivered his Autumn Statement speech to Parliament yesterday. The key points to note for private clients include the Coalition's answer to a Mansion Tax, namely a reform of SDLT.

TAXATION OF RESIDENTIAL PROPERTY

Stamp Duty Land Tax

SDLT was unexpectedly reformed with immediate effect.

SDLT will no longer be charged at a single rate on the whole purchase price of a property. Instead, varying SDLT rates will apply to the parts of the property price that falls within each band.

New rates have also been introduced: 0% for up to £125,000, 2% for up to £250,000, 5% for up to £925,000, 10% for up to £1.5m, and 12% for over £1.5m.

The total SDLT paid will be reduced or remain the same for properties worth less than around £937,000, but for properties with a value of around £937,000 or more SDLT will now be payable on purchase. For example, a further £18,750 SDLT will be payable on the purchase of a £1.5m house.

The additional amounts payable on the purchase of high value properties are significant, but a one off payment is perhaps more palatable than the proposed Mansion Tax. The Mansion Tax proposes an annual charge which many would have to roll up until death at which time it would become payable in addition to Inheritance Tax on the property.

Annual Tax On Enveloped Dwellings

ATED - the annual charge on high-value residential property held through a corporate envelope - will increase substantially from 1 April 2015. The new annual charge will be £23,350 for properties worth between £2m and £5m, £54,450 for properties worth between £5m and £10m, £109,050 for properties worth between £10m and £20m, and £218,200 for properties worth more than £20m.

We expect to see an increase in restructuring as a result of these higher charges, and in many cases will need to review advice given in the past which was based on the lower annual charges.

Changes to simplify filing obligations for properties that fall within ATED but are eligible for relief will be made. The changes will take effect from 1 April 2015 but the details are as yet unknown.

Income Tax

The personal tax free allowance will be increased to £10,600 for the 2015/16 tax year, and the higher rate threshold at which income tax is charged at 45% will increase by 1.2% in line with inflation. Having had to wait 5 years for any increase in the higher rate threshold many taxpayers may feel that these welcome changes are long overdue.

The Government has decided not to restrict...