2015 Autumn Statement

Chancellor George Osborne presented his Autumn Statement last Wednesday and made a number of unexpected announcements.

The reversal of the previously announced tax credit changes

Changes to NIC Employment Allowance

Restrictions on tax relief for travel and subsistence expenses for workers engaged through employment intermediaries

Extension of business rates relief for small businesses

The introduction of 3% higher rates of Stamp Duty on buy to let and additional residential properties

The introduction of payment on account of any capital gains tax due on the sale of residential properties

Tax Credits

Some of the changes announced in the July budget have been reversed so the level of income at which a claimant’s tax credit award is tapered away and the rate at which it will be tapered away will remain at current levels.
However this is a short -term benefit for claimants as tax credits are to be replaced by Universal Credit which is expected to be less generous.

NIC Employment Allowance

From April 2016 the NIC Employment Allowance will be increased to £3,000 however companies where the director is the sole employee will no longer be eligible to claim the Employment Allowance.

Travel and Subsistence costs

As an anti-avoidance measure the tax relief on travel and subsistence expenses will be restricted for workers engaged through an employment intermediary, such as an umbrella company or a personal service company.

Business Rates Relief

The current exemption from business rates for properties with a rateable value of £6,000 will be extended for another year.

Stamp Duty Land Tax

An additional 3% SDLT will be charged on purchases of additional residential properties from 1 April 2016. This will affect buy to let landlords and anyone buying a second home.

Capital Gains Tax on sale of residential properties

From April 2019 any capital gains tax payable on the disposal of residential properties must be paid within 30 days of the completion date. This does not affect most sales as they will not be liable to CGT due to Private Residence Relief.

How can I give a financial gift to Alice?

The birth of Alice, my first granddaughter in September had me thinking about the best way to support her in the future. Whether it is small gifts, regular savings or larger amounts to help with university fees, a deposit for a home or the cost of a wedding then it could have Inheritance Tax (IHT) implications.

There is an IHT annual exemption which means you can give up to £3,000 per tax year. If you did not “gift” any money the previous year this can be carried forward, enabling you to give £6,000 free from IHT. Any gifts over this amount will only be free from IHT provided that you survive more than seven years.

The seven year survival rule also applies to any money over £3,000 put into a trust that the grandchild can access once they are 18 years of age.

In addition there is a small gifts allowance which enables you to give gifts of up to £250 per recipient free from IHT each year.

Another option is to open a savings account in the grandchild’s name. The interest earned on this account will be tax free. Obviously the greater the amount invested the greater the tax saving.

Alternatively the grandparent can pay into a Junior ISA. Whilst the grandparent cannot open the account you can make contributions up to the annual tax free limit of £4,060. This money cannot be accessed until the grandchild is aged 18 so it should help with college fees, etc.

Given that all these exemptions exist it seems only sensible to plan ahead and to ensure that you are not caught by an IHT liability when it was not necessary.

What happens if I am unable to run my business?

If an accident or ill health prevents you from running your business, what happens?

There are no automatic rights for partners or spouses to take over the running of a business and if there is just a single company director then the bank’s automatic response will be to freeze the bank account. This can have a catastrophic effect on the business if you are unable to pay staff or suppliers.

The solution is to set up a commercial Lasting Power of Attorney (LPA). An LPA can cover both your personal and business affairs but can be restricted to just the running of the business. Ideally the person appointed should be someone you trust with some knowledge of the business so that it can continue operating. The LPA can be revoked at any time.

Whilst it is only natural to hope that it will never be needed we recommend that this should be considered in order to give you and your family peace of mind.

If you think that this may affect you then please contact us to arrange a free consultation about setting up a commercial Lasting Power of Attorney.