Specialist financial planning practice

Autumn Statement 2015

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27 November 2015

Autumn Statement 2015

Having already delivered two budgets this year, the Chancellor’s Autumn Statement was a little more traditional, with a focus on government spending rather than fiscal measures. George Osborne was handed an escape route from his much-hated tax credit cuts. Stronger than expected tax receipts and lower borrowing costs meant that he had some £27 billion of extra capacity which allowed him to put a complete halt to the tax credit cuts (cut the cuts, if you like) that the House of Lords so famously voted down. Working tax credits will eventually be phased out to be replaced by the Universal Credit, but for the time being they will stay.

This was a big and unexpected announcement but there are of course many other noteworthy measures. But rather than produce just another list here (after all in this modern media age it’s all out there waiting to be read), I will concentrate on just three that caught my attention.

Stamp Duty Land Tax

The additional 3% stamp duty on second properties delivered another swipe at the buy-to-let market. This is quite a hit and will add thousands to the purchase cost of even the most modest second home. It is part of a suite of measures that are designed to encourage and help home-ownership – such as extending the right-to-buy scheme to housing associations, and the creation of a London Help to Buy scheme offering a 40% interest-free loan to those in London with a 5% deposit – but, as always, we need to see the detail. For example, how will it apply to tenants-in-common where the tenancy is not evenly split? Will married couples owning one property in one name purchasing a second property in the other’s name be affected?

IHT on Pensions

It is a long established principle that pension funds are not subject to Inheritance Tax; however, HMRC has recently questioned whether pensions placed into drawdown but where no income is taken, i.e. only the tax-free cash has been withdrawn, should be liable to IHT. The argument goes that pension funds are designed to provide retirement income (which is taxed) so, where that income is not taken, the fund should be taxed on death. The Government will now introduce legislation that no Inheritance Tax is paid on pension funds designated for drawdown that have not been drawn down prior to the member’s death and that this will be backdated for deaths on or after 6th April 2011. This is good news, and finally removes any doubt over whether pension funds are assessable for IHT.

Deeds of Variation

A quick reminder – a deed of variation allows beneficiaries to alter a will or intestacy to give a more beneficial outcome, provided all parties agree and the variation is completed within two years of death. You may recall a little mischief-making by the Chancellor before this year’s general election, when he announced a review into deeds of variation. The then Leader of the Opposition had benefitted from just such an arrangement on his father’s estate. On Wednesday it was announced that, following this review, the Government has decided not to introduce new restrictions on how deeds of variation can be used for tax purposes. This is welcome news as deeds of variation enable assets to be redirected in the way that is most appropriate for a family’s situation at the time of death, rather than at the time the will was drafted (which could have been many years previously). But, a small caveat, the Government has said that they will be keeping a close eye on how deeds of variation are used in practice going forward.

Finally, we are now to benefit from a £250 million ‘permanent pot hole’ fund. I suspect permanence in the pot hole context is unlikely to garner many votes!

We will of course keep a close eye on the finer details as they emerge and will review any impact on your personal circumstances at your next review meeting. As always, do let us know in the meantime if you have any questions or should there be specific aspects of the changes that are of concern.

 

Philip Chandler APFS, CFPCM, Chartered MCSI

Chair of Aspinalls Investment Committee