There will be tax cuts for savers and house buyers – but bigger tax bills for technology companies and banks, George Osborne announced in today’s Autumn Statement. The speech was Osborne’s last opportunity as Chancellor to remind the nation of everything this Government has achieved over the past four years before the general election in March. Osborne revealed the UK economy will have grown 3% this year – outpacing France, Germany and the rest of the Eurozone. But there were slightly disappointing figures forecast for 2015 and 2016 as the economy fails to keep up with the current rate of growth.
Osborne said he was committed to low taxes for all – people and businesses – but that these tax bills must be paid. He singled out large multi-national companies, technology firms, investment managers and high street banks for specialist tax measures to ensure they paid their way.
It was good news for businesses in the creative industry as orchestras, children’s television and animators benefitted from tax breaks. Osborne also announced that aid workers who die in warzones would not face inheritance tax on their estate.
ISAs and Pensions Tax Cut
Currently when a person dies their ISA savings lose their tax free status, forcing those who inherit the savings pot to sell off investments to meet tax bills. However, this will no longer be the case from April 2015 – and there was an increase in the ISA allowance too.
“ISAs remain the first port of call for many investors and the ability to pass the ISA wrapper to your spouse when you die coupled with the increased allowance of £15,240 makes the ISA wrapper even more appealing to households,” said Adrian Lowcock of AXA Wealth.
However if ISA savings are passed onto children, or other beneficiaries other than a spouse, that beneficiary will have to pay inheritance tax.
Pensions also benefitted from spousal tax breaks. Currently those who are bequeathed pension savings have to pay inheritance tax on the pot of cash, but from April pensions will be tax-free on death before age 75. Joint life annuities will also be tax-free on death before age 75.
Good News for Home Buyers and Drivers
Stamp duty has been revolutionised, with a new system akin to the income tax thresholds introduced from midnight tonight. Previously, paying just £100 more for your property could result in your stamp duty bill jumping from £2,500 to £7,500 as you moved up into a higher housing bracket. Now, home buyers will have to pay a percentage of the house’s value above tiered thresholds. The stamp duty on house purchases will fall for 98% of home buyers, with only those purchasing properties over £937,000 seeing a hike in stamp duty.
The announcement had a positive effect on housebuilders' share prices, which have benefitted from several economic measures in recent years, including Help to Buy and low interest rates.
The Chancellor also confirmed that fuel tax will be frozen and vowed to pass on the fall in oil prices to drivers. Osborne also abolished air passenger duty for children aged under 12, and announced plans for this to be extended to children aged less than 16. Airplane and travel operators saw their share prices jump after this measure was announced.
Bad News for Banks
The public supported the banks in the crisis, so now the banks must support the public in the recovery said Osborne. Banks will no longer be able to write off taxes against losses and a range of tax measures aimed at the banks will raise £4 billion over the next five years. Bank shares fell at this news.
Multi-national companies who avoid paying tax in the UK will have to pay a diverted profits tax – with Osborne singling out large technology companies as the worst offenders. This could affect stock investors who own the sector. The Chancellor also announced plans to crackdown on investment managers who disguise fee income. The measures to prevent the exploitation of miscellaneous loss relief will be introduced from next April.
“It will affect sums which arise to managers who have entered into arrangements involving partnerships or other transparent vehicles, but not sums linked to performance, often described as ‘carried interest’, nor returns which are exclusively from investments by partners,” the full Statement revealed.
