Chancellor George Osborne has just revealed his latest Autumn Statement, and while some of it had been predicted, there were also a few surprises thrown in along the way. Here's a quick overview of the key points.
First up, the big one – stamp duty reforms. It had been hoped that the Chancellor would focus on this in his statement, and he duly has – the reforms will supposedly help 98% of homebuyers as they'll pay less tax as a result, with the widely-criticised 'cliff edge' arrangement being reformed to a more proportionate system. When the rules come into effect, there'll still be no stamp duty to pay on the first £125,000, and then 2% will be paid on the portion up to £250,000 – rather than a flat rate of 1% on the full amount. Similarly, 5% will be paid up to £925,000, then 10% up to £1.5m, and an increased rate of 12% will be paid on everything above that.
an increase to the personal allowance was another notable addition to the Statement. The tax-free personal allowance – the amount earned before income tax has to be paid – was originally intended to rise to £10,500 in April, up from its current level of £10,000, but it'll now be increased further to a threshold of £10,600. According to the Government's calculations, this could result in an average income boost of £825 per year for the typical worker.
a reform of business rates had been predicted by many, and it looks as though the Chancellor has followed through. Business rate relief will be doubled for a further year, and the 'high street discount' will be increased by 50% (to £1,500) from April 2015 to March 2016. The annual increase in business rates will be capped at 2% during the same period, and the transitional arrangements for smaller premises will be extended to ensure they don't face a detrimental tax charge after the transitional rate relief comes to an end.
In a surprise move, ISA benefits will now be passed onto spouses. The Chancellor announced that, from today, if an ISA-holder dies, they'll be able to pass on the account benefits to their spouse or civil partner. This will be achieved through an additional ISA allowance, which the surviving partner will be able to use from 6 April 2015. This is a significant change from the current system, which states that if someone passes away, they can't pass their ISA onto their partner, meaning a lot of people could lose out on the tax advantages – even if they'd saved together. The changes mean that the surviving partner will be allowed to invest as much into their own ISA as their spouse used to have, in addition to their normal annual ISA limit.
In other ISA news, the tax-free limit will be increased to £15,240 from next April, offering savers the chance to benefit from additional tax-free returns. The Chancellor also confirmed that the so called 'death tax' on annuities would be abolished – the 55% tax charge that currently applies when an unused pension pot is passed on will be removed, essentially meaning that people will be able to pass on their pension savings to their loved ones tax-free. Those who die before the age of 75 with a joint life or guaranteed term annuity will be able to pass that on tax-free, too.
Other measures include children being exempt from economy class flights, an additional £2bn of funding for the NHS, no more National Insurance contributions for apprentices under 25, and the opportunity for postgraduate students under 30 to apply for an income-contingent student loan. There are also significant plans for the UK's infrastructure – including a further £15bn to be spent on roads and £6bn in funding for local road improvements – while tax avoidance of multi-national companies will come under sharper scrutiny, including a 25% 'diverted profits' tax. Fuel duty will also be frozen, banks will be required to increase their corporation tax payments, and investment of £7bn will be provided to create a 'Northern Powerhouse'.
So, it's a mixed bag for this year's Statement, but the changes have been largely welcomed. There was one notable exception, however – the Chancellor failed to disclose any further specific details about the Pensioner Bond, something that had been widely expected to occur. However, he did say that the rates for the bonds would be published next week, so we'll keep you updated of any further developments as and when they're announced.
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