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Summer Budget 2015: The Headlines
- AuthorIan Bradshaw
On 8 July the Chancellor presented his Summer Budget to Parliament. Many of the measures contained in the Budget will have a significant impact on a range of Private Client issues and we will be looking at these in more detail over the coming months. In the meantime, we have summarised the key headlines below:
1. Inheritance Tax
As announced in advance of the Budget, from April 2017 there will be an additional nil rate band available when a residence is passed on death to a direct descendant. A ‘direct descendant’ is a child (including a step-child, adopted child or foster child) of the deceased and their lineal descendants. The main residence nil rate band will be transferable where the second spouse or civil partner of a couple dies on or after 6 April 2017 irrespective of when the first of the couple died.
2. Ending permanent Non-Domiciled status
Currently the UK allows non-doms to pay tax on their offshore income only when this is brought to the UK. From April 2017, permanent non-dom status will be abolished and anyone who has been resident in the UK for 15 out of the last 20 years (as at April 2017) will be treated as UK-domiciled for tax purposes, and subject to tax on their worldwide income.
3. Remittance Basis Charge
As a result of abolishing permanent non-dom status, the £90,000 remittance basis charge for individuals who have been resident in the UK for 17 out of the last 20 tax years will become redundant from 6 April 2017.
4. Non-Doms: IHT on UK residential property
Currently non-doms can avoid inheritance tax on UK residential property by owning it indirectly, for example, via an offshore company. The IHT excluded property rules will be amended so that UK residential property owned indirectly by non-doms will be subject to inheritance tax.
5. Tax: Personal Allowance and Higher Rate Threshold to increase
The income tax personal allowance will increase to £11,000 in 2016-17 and £11,200 in 2017-18. Once the allowance reaches £12,500 it will rise in line with increases to the national minimum wage. This should ensure that those who work 30 hours per week at minimum wage are not subject to income tax. The higher rate threshold will increase to £43,000 in 2016-17 and £43,600 in 2017-18.
6. IHT: Relevant Property Trust charges
There will no longer be a requirement to include non-relevant property when calculating the IHT charges in a relevant property trust. This will apply to all charges regardless of when the trust was created. Measures are also being introduced to tackle tax avoidance through the use of multiple trusts.
7. Reforming Dividend Tax
From April 2016 the dividend tax credit will be replaced by a tax-free dividend allowance of £5,000. This means that only those with significant income from dividends will pay more tax.
Further details of the above measures should become clear over the coming months. It is important for individuals to be aware of the potential effect of the above reforms on their tax planning and provision for the future, and we will be looking at these measures in detail as they develop.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.