On Wednesday 25 November the Chancellor George Osborne presented the first Autumn Statement of this Parliament along with the Spending Review.
His speech and the supporting documentation set out both tax and economic measures, however the primary focus seems to have been on the Spending Review, rather than the Autumn Statement, which will hopefully make this blog short and sweet. Our summary concentrates on the tax measures which were few and far between!
Just a note here….. Draft legislation relating to many of these areas will be published on 9 December and some of the details may change as a result. The Government has a history of making a Budget or Autumn Statement announcement that says one thing, and then when the measures are put into law, they’ve been tweaked to say something slightly, but potentially fundamentally different.
Employer Provided Cars
Currently when an employee has private use of a car provided by their employer, where that car is a diesel there is a 3% supplement on the benefit in kind. This was expected to be abolished from April 2016 in line with the fact that diesels have become kinder to the environment than historically. However the supplement will now be retained – perhaps as a result of the emissions scandal that has engulfed the motor industry over the last few months and the evidence that diesels may not be quite as clean as they have been made out to be.
A new apprenticeship levy will be introduced in April 2017 at a rate of 0.5% of an employer’s paybill, excluding benefits in kind. Before you panic though, each employer will get an allowance of £15,000 and doing the sums shows that this will only affect employers with a payroll over £3m per year….. phew!
Capital Gains Tax (CGT) Payment Dates
The Chancellor has introduced yet another measure in his apparent crusade against residential landlords! Currently, capital gains tax due for the tax year is payable by 31 January following the end of the tax year, along with income tax. However from April 2019, a payment on account will be required within 30 days of completion for CGT due on disposal of residential property. Here’s a few examples of CGT payment dates based on before and after April 2019:
You will see that the tax payable on disposals a month later would have to be paid eight months earlier!
While the measure is a huge cash-flow disadvantage compared to the system we have in place now, it does make sense to pay the tax when you have the money. This is in line with the Government’s wider strategy and approach towards a real-time tax system.
This will inevitably put on pressure with regards to calculating the tax due; it is not yet clear if the tax will be deducted as part of the completion process and paid over to HMRC on your behalf by the solicitor (as is the system in other countries). If this is the case, we will work closely with the solicitor involved to ensure that our clients pay the correct (and hopefully lowest possible) amount of tax.
Stamp Duty Land Tax (SDLT) on Additional Properties
George Osborne deals another blow to residential landlords….
From 1 April 2016 SDLT will be charged at a higher rate (3% higher than the standard rate) on the purchase of additional residential properties, including buy-to-lets and second homes. This won’t apply to caravans, mobile homes or houseboats, or purchases by companies.
If you are looking at purchasing a buy-to-let residential property, please get in touch beforehand so we can discuss your options with you. This, together with accelerated CGT payment measure above and the removal of higher rate tax relief on interest payments may mean you wish to reconsider how to structure the purchase.
Making Tax Digital
I hinted at it earlier in the blog, but the Government are committed to “transforming HMRC into one of the most digitally advanced tax administrations in the world” at a tiny cost of £1.3bn! The Government will consult on the details, which have so far been pretty thin, in 2016. They have however said that most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.
This is a huge transformation in the tax system and theoretically could spell the end of the tax return season as we know it! Could this mean no more 31 January deadline? We will keep you informed when we know more.
This is just a quick roundup of a few of the tax measures from the Autumn Statement, but you can view our full summary, including a reminder of other key developments which are due to take place from April 2016 on our website, just click here.
As always, if you have any questions on the above, please get in touch on 0116 242 3400.