Chancellor George Osborne delivered his Autumn Statement on 5 December 2013. While some of the policies had already been widely predicted, there were some surprises in the package announced. We set out a summary of the key policies that were announced:
Capital Gains Tax and Non UK Residents
As predicted, the Chancellor introduced a Capital Gains Tax ("CGT") charge on future gains for foreign owners of residential property in UK from April 2015. The tax will be applicable on gains post 5 April 2015. It is not clear whether this charge is intended to apply solely to individuals or extend to companies and other non-natural persons as the latter are subject to the annual charge on UK property following the introduction of the Annual Tax on Enveloped Dwellings from 6 April 2013. Clarity on these points will we hope be addressed through the consultation on how best to introduce the new CGT charge to be published in early 2014.
Amendment to CGT Private Residence Relief
Second home owners and landlords will be affected by the scaling back of the Private Residence Relief (PRR"). At present, a property will qualify for PRR if the owner has used it as their only or main residence at some point in the previous three years. PRR will apply even if at the time the gain is realised the property is not the owner's main residence at that time. However, the allowable period of 3 years will be reduced to 18 months from 6 April 2014.
Transferable Marriage Tax Allowance
From 6 April 2015, married couples will be able to transfer £1,000 of their income tax personal allowance between each other to maximise the benefit provided neither is a higher rate tax payer. It will be of benefit to married couples where one party does not use 100% of their personal allowance and could be worth up to £200. The transferable amount will be automatically updated in line with increases to the income tax personal allowance.
Increase in the Income Tax Personal Allowance
The income tax Personal Allowance will rise to £10,000 for those born after 5 April 1948. The upper limit of the basic rate of income tax will be lowered by £145 from 32,010 to £31,865 from 6 April 2014.
Increase in the CGT Annual Exemption
The CGT annual exemption for 2014-15 increases by £100 to £11,000 and again in 2015-16 to £11,100. The exemption will be £5,500 for both tax years for trustees.
Relevant Property Trusts and Treatment of Income
The Chancellor has sought to simplify the treatment of trust income for the calculation of the 10-year anniversary charge by amending. The original proposal was to treat income as capital where it remained undistributed from the start of the second tax year after the end of the tax year when the income had been received. This will now be amended so that income that has remained undistributed for more than five years will be treated as part of the trust capital.
Pilot Trusts
There will be further consultation on proposals to split the settlor's nil rate band between the number of relevant property trusts he has established. However, the Government aims to implement this proposal in 2015.
Vulnerable Beneficiary Trusts
There is to be an extension of the CGT 'uplift' provisions to a vulnerable beneficiary's trust interest where they die on or after 5 December 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
