22 November 2017

Autumn Budget 2017: Personal tax

A summary of the key personal tax changes announced by the Chancellor during the Autumn Budget 2017.

Rates and allowances update

The Chancellor once again used his Budget speech to announce further increases in the income tax personal allowance and higher rate (40%) threshold. These will rise to £11,850 and £46,350 respectively for the 2018/19 tax year. Again, we need to point out that this may not be passed onto Scottish taxpayers. At the moment we already have a divergence in the higher rate threshold which stands at £43,000 for Scottish taxpayers on non-savings, non-dividend income and £45,000 for the rest of the UK. Further details are most likely going to be announced for Scottish taxpayers in the December Scottish budget.

Capital gains tax allowances will be increased in line with the Consumer Prices Index (CPI). The annual exempt amount for individuals and personal representatives rises from £11,300 to £11,700 from April 2018, while the amount for trustees rises from £5,650 to £5,850.

No changes were announced to national insurance, following the rapid scrapping of the proposals announced in the last Budget.

The starting (0%) rate band for savings income will remain at £5,000 for 2018/19. The ISA allowance will also remain at £20,000 for 2018/19, but with an increase to £4,260 for Junior ISAs and Child Trust Funds.

The lifetime allowance for pension savings will be increased for 2018/19 from £1 million (where it has remained since April 2016, when it was reduced to that figure) to £1,030,000, in line with CPI.

​Property in the spotlight

The Budget contained a number of notable property-related measures. Although not specifically mentioned within the Chancellor’s speech, significant changes are being made to the taxation of UK property held by non-UK resident individuals and companies.

One of the key changes involves the taxation of capital gains made by non-residents on the sale of all types of UK immovable property. This is an extension to the existing rules, which apply only to residential property, and the intention is to create a single regime for disposals of interests in both residential and commercial property.

This will have a substantial impact on commercial property, although the measures include a rebasing of these properties to their market value at April 2019. Although some aspects of the reforms are fixed, these changes will be considered through a consultation document  published today.

Another significant change concerns the taxation of income and gains arising from UK properties that are held within non-UK resident companies. From April 2020, income that non-resident companies receive from UK property, both residential and commercial, will be chargeable to corporation tax rather than income tax.

In addition, any gains arising on the sale of these properties will also be chargeable to corporation tax, rather than capital gains tax (CGT). For residential properties held prior to April 2020, it is likely that these will remain liable to Annual Tax on Enveloped Dwellings (ATED) CGT and non-resident CGT, where applicable, on gains accruing prior to that date.

Stamp duty help for first-time buyers

One of the Budget’s eye-catching announcements concerned the new relief from Stamp Duty Land Tax (SDLT) for first-time buyers. This relief will apply from 22 November 2017 on the purchase of residential property for £500,000 or less, provided that the purchaser intends to occupy the property as their only or main residence.

Where the purchase price is £300,000 or less, first-time buyers will pay no SDLT at all. Where the property costs more than £300,000 but does not exceed £500,000, they will pay 5% SDLT only on the amount that exceeds £300,000.

Draft legislation introducing the relief has been published, and we expect this to be included within the Finance Bill to be published early next month. 

Please note that this announcement does not apply to properties purchased in Scotland, which are subject to the Land and Buildings Transaction Tax (LBTT). The Scottish Government may choose to introduce something similar, but we will have to wait until the December Scottish Budget to find this out.  

Other property issues

In the 2015 Autumn Statement, it was announced that from April 2019 the payment window for any capital gains tax liability arising on the sale of residential property would be reduced to 30 days from the date of disposal. It has been announced that this change will still go ahead, but will be deferred to April 2020.

It has also been confirmed that the annual chargeable amounts under ATED will be increased by inflation for the year ended 31 March 2019. These amounts are due for payment by 30 April 2018.

Local authorities will also be given the power to charge a council tax premium of up to 100% on empty properties.

Entrepreneurs’ Relief - relief after dilution of holdings

The Government will consult in Spring 2018 on how access to the relief might be given to entrepreneurs whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial purposes by means of issues of new shares. Allowing relief in these circumstances would incentivise entrepreneurs to remain involved in their businesses following external investment.

Some further measures were announced potentially affecting private clients:

  • Certificates of Tax Deposit. It will not be possible to purchase these with effect from 23 November 2017. Existing certificates will continue to be honoured until 23 November 2023.
  • Changes to the taxation of trusts. The Government will issue a consultation document in 2018.
  • Rent-a-room relief. The Government will look at the current usage of the relief in order to see how it could be better targeted at longer-term lettings. This could potentially affect those using the relief for ‘Airbnb’ type lettings.
  • Collecting self-assessment tax debts. The Government intends to use new technology to collect self-assessment debts faster through the PAYE system from April 2019.
  • Non-compliance involving offshore structures. The Government proposes to extend the time limits for assessing such non-compliance to 12 years, with a consultation proposed for Spring 2018. They will also publish their response in December 2017 to a previous consultation on introducing additional obligations to notify HMRC of certain types of offshore arrangements.
  • Late submission of returns and late payment of tax. The Government will publish their response to a previous consultation on simplifying penalties for these failures.
  • Transfer of unused personal allowance. Taxpayers are currently allowed to transfer up to 10% of their unused personal allowance to their spouse or civil partner if they are a basic-rate taxpayer. The Government announced that this would now also be allowed in cases where the partner died before the claim was made.
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