Warrener Stewart's Response to the 2015 Autumn Statement
Today’s Autumn Statement was almost entirely devoid of changes to the tax system – a welcome respite following the myriad of new measures announced in the Budget this summer. There were however a few important announcements today, which should not be overlooked.
SDLT and Property
The most significant change was a further squeeze on buy-to-let landlords – this time, through a surcharge on SDLT. From 1 April 2016, the purchase of buy-to-let residential property will attract a 3% surcharge over and above the usual rates of SDLT. Together with the abolition of the 10% “wear & tear” allowance also taking effect next April, and the proposed restriction on mortgage interest relief from April 2017, this presents a three-pronged tax attack on private landlords.
The 3% SDLT surcharge will also apply to purchases of second homes (“additional residential properties”) from 1 April 2016 onwards.
It is proposed that corporate landlords and property investment funds which own 15 or more residential properties will be exempt from the 3% surcharge, although this is subject to policy consultation.
From April 2019, where capital gains tax is due on the disposal of a residential property, payment of the tax will be due within 30 days of completion. This is a significant change from the current Self-Assessment system, under which individuals have up to 22 months until CGT is payable, depending on the time of year of the disposal.
Tax on Dividends
Although nothing new was announced today, we would like to re-highlight the major changes to the taxation of dividends announced at the Budget. The rates of tax applicable to dividend income will increase by 7.5% at all income levels from April 2016, although this is mitigated to a certain extent to a new £5,000 tax-free allowance for dividends.
Individuals with substantial dividend income – in particular shareholders of owner-managed companies – should start planning their profit-extraction strategy as soon as possible, in order to mitigate the impact of these changes.
Inheritance Tax
In a U-turn to policies announced before the general election, the Government has confirmed that no restrictions will be introduced on how ‘deeds of variation’ are used. This valuable IHT planning tool therefore remains available going forward, although the Government has said it will continue to monitor their usage.
If you would like to explore what today’s Autumn Statement could mean for you and your business, please call 020 7731 6163 to talk to one of our tax team. You can also download our updated 2015 / 2016 tax card.