Autumn Statement 2014 – our thoughts & entrepreneurs’ relief changes

Red Budget CaseWith the recent Autumn Statement now being fully digested and analysed we thought it would be useful to share our insights into the relevant information for our clients.

George Osborne’s Autumn Statement – the last major set of financial measures to be announced before next year’s general election – got a mixed verdict from the media. At one extreme, the Guardian called it ‘lean, mean and extreme’, echoed by the Mirror’s claim that all it offered was five more years of austerity. At the other extreme, the Telegraph said the prize of a smaller state was within reach and the Mail hailed the stamp duty changes as a bonanza boost to the property market, though the Times said he had staked the election on a consumer boom fuelled by rising house prices. More forensically, the Financial Times pointed out that it was only the assumption of lower interest rates on still-rising government debt that enabled the Treasury to forecast lower government spending in 2018-19. The Independent said Osborne’s targets to reduce government spending included £30 billion of unspecified cuts. Most commentators said the proposed scale of cuts over the next five years would be extremely hard to deliver.

Gains tax saving for business owners

The Autumn Statement included a modest benefit for business owners. In future, they will be able to defer any capital gains tax liability that is eligible for the lower entrepreneurs’ relief rate of 10% by ‘rolling over’ investment into an Enterprise Investment Scheme or Seed EIS. If you are a business owner and you would like more information please contact us on 0121 308 8034.

Get ready for Pensioners Bond

The Chancellor had been expected to confirm the interest rates to be offered on Pensioners Bonds in the Autumn Statement – instead the rates will be announced on Friday 12th December. In the Budget, he had suggested market-beating rates of 2.8% for one year and 4% for three years. The overall allocation for the bonds is only £10 billion with a maximum of £10,000 per person in each bond, and demand is expected to be high. We suggest everyone interested in these bonds registers their interest now at the National Savings & Investments website so that they can obtain an application form as soon as this becomes available.

Small relief on taxes

The tax changes announced in the Autumn Statement, to take effect from next April, are modest in scope. The Treasury claimed that 24 million people will pay on average £120 less income tax over the year as a result in the rise in the income tax threshold to £10,600. But accountants pointed out that the National Insurance threshold is unchanged at £7,956 so millions of people who pay no income tax still pay NI. Others said that the higher rate income tax threshold, which will rise to £42,385 next April, will still be below the level it was prior to the coalition government in 2010, and that if it had risen in line with inflation it would be over £53,000.

Inherit an ISA

The Autumn Statement included a small giveaway for older investors. With effect from December 3rd, a husband, wife or civil partner can inherit their partner’s ISA on their death and keep the tax exemptions. Previously, those tax benefits ceased at death. On a £100,000 ISA, the annual tax savings in an ISA for a basic rate taxpayer could be over £500.

First-time buyers win from Stamp Duty changes

The switch from the old ‘slab’ system of Stamp Duty to a tiered system means 98% of home buyers will pay less on property purchases with effect from 3rd December. Under the old system, someone buying at £260,000 paid the 3% rate on the full amount, but now they pay 2% on the band between £125,000 and £250,000 and 5% on the amount above £250,000. The losers are buyers of property worth over £937,500, and the top rate of stamp duty rises to 12% on purchases over £1.5 million.

 

If you would like a second opinion on your wealth management needs please contact the office on 0121 308 8034.

 

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