Weightmans' pre-budget predictions

In George Osborne’s utopia, UK Plc’s accounts would be in the black by 2019/20 by making £12bn worth of social security savings.

Chancellor’s Autumn Statement to be given on Wednesday 25 November 2015

In George Osborne’s utopia, UK Plc’s accounts would be in the black by 2019/20 by making £12bn worth of social security savings. But it is now clear that he won’t be able to save the full £4.4bn on tax credit changes alone. It is a safe bet that he will look to raise taxes and over the past few year the wealthy have been in his sights. The pledge not to increase the rate of income tax, NICs or VAT (the triple tax lock) means that simply increasing the rates of tax is not an option and therefore any tax raising measures are more likely to be focused on narrowing reliefs.  Many generous tax breaks have been removed recently, however there are still a few open-handed reliefs which could be 'modified' to collect more tax – with the following in the firing line:

  • Business property relief (BPR) and Agricultural property relief (APR) provide up to 100% exemption from Inheritance Tax on the death of the owner/shareholder and are rightly regarded as very generous reliefs. There have been rumblings for years that the availability of BPR may be reduced or restricted.

  • APR may also not escape a modification. Over the past few years canny investors have been attracted by the increasing value of good quality farmland and the favourable IHT benefits.

  • Non-domiciled individuals hoping that a Conservative Government would be more understanding of their status compared to other parties in the run up to the election were hit when George Osborne announced fundamental changes to the tax treatment of foreign domiciled taxpayers. Those changes will come into effect from 6th April 2017 and it is hoped further clarity will be provided in the Autumn Statement.

  • One would not be surprised if the rules relating to Entrepreneurs’ Relief were reviewed. A reduction in the amount of the relief (the “lifetime limit”) and/or a tightening of the rules such as a removal of the relief when transferring shares to family members to trigger a material disposal or incorporating a property letting business are a possibility.

The rise in self employment has also been a cause of concern for the Treasury, a self employed person generating less tax than an equivalent employee (primarily due to their being no employers NICs) and being able to access more generous tax reliefs and deductions.  An update on a number of consultations in this area is expected, including potential changes to the IR35 rules in relation to the use of personal service companies. 

If do we see changes to any of the issues above, then it will be unsettling for those who currently contribute the highest share of taxes. Some of the above will be necessary for political reasons, and on this occasion, for economic plugging of holes.

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