With the Autumn Statement being delivered on 25th November 2015, our Tax Associate Chris Hodgson shares his predictions…
The Autumn Statement looks like it could be a busy one for advisors in the area of private client taxation. The Chancellor has a £4.4 billion hole in his plans because of the rebuff of the proposed tax credit changes by the House of Lords and his response may be to increase savings in other spending departments. However, some of those missing funds may have to come from tax increases.
He has also limited his options by introducing a tax lock, which prevents him from increasing the rate of Income Tax or VAT. This leaves George Osborne with other possible areas of taxation to consider, if he chooses to increase taxes, including Capital Gains Tax, Inheritance Tax and Stamp Duty Land Tax.
Some of my predictions are as follows:
Capital Gains Tax
There is speculation that the rate of tax on capital gains could rise from the current level of 28% to 40%. When the 28% rate was introduced it was said to be at a level that would produce the maximum revenue, as a higher rate would discourage the sale of assets and Capital Gains Tax is only payable if an asset is sold. However, the potential taxes that might be generated by a rate increase could be attractive. The Chancellor may also choose to limit capital gains tax relief. Possible options in that area could include Entrepreneur’s Relief as well as Incorporation Relief, particularly where a landlord is transferring properties into a limited company.
An increase in the rate of tax would be difficult for a Conservative Chancellor, but a restriction is reliefs might again be in view. For example, the value of farm land has doubled in recent years and created a market in farm land as an investment asset. However, farm land can qualify for 100% relief for Inheritance Tax, so a further limitation on the relief available to landlords of agricultural land may be included in the Statement.
Stamp Duty Land Tax
We now have different regimes for residential property and commercial property and there is also now a separate regime in Scotland. It is not unreasonable to imagine a change to SDLT that is dressed up as a simplification, which happens to increase the revenue generated by SDLT. This could be alongside possible limitations of some reliefs, such as multiple dwellings relief.