30 March 2012 by

2012 Budget Tips for Individuals; the Angel’s in the Detail

The main points of the 2012 Budget have been well documented by the media over the past week, and you may feel like you have Budget overload, but there are relevant points that are buried in the detail which could be useful for you beyond the hackneyed income tax and stamp duty land tax changes.

Inheritance Tax

The threshold at which inheritance tax is paid on death will remain frozen at the current rate of £325,000 until 5th April 2015. It is then proposed that from the 6th April 2015 the threshold should rise in line with the Consumer Price Index (CPI).

As already announced, the Finance Bill 2012 will provide for a reduced rate of inheritance tax for those who leave at least 10% of their net estates (as defined for this purpose) to charity. The reduced rate will apply in relation to deaths on or after 6 April 2012.

Capital Gains tax for non-uk residents

At a time where more and more non-residents are investing in property in the UK, it is no surprise that the Government is seeking to extend the rules on capital gains tax to non-residents.

The Budget announced that from April 2013 the capital gains tax regime will be extended to cover gains on the disposal of UK residential property, and shares or interests in such
property, by non-resident, “non-natural” persons, which is likely to include overseas companies, collective investment schemes and trusts.

A consultation will be entered into to discuss the practical implications of enforcement.

Cap on Income Tax Relief

Another interesting announcement in the Budget is related to the cap on income tax relief for individuals.

The Chancellor announced that income tax reliefs are to be capped for individuals at £50,000 or 25% of income, whichever is the greater. This will apply from April 2013. The cap should not apply to those reliefs that already have a statutory limit (such as pension contributions, investments in Enterprise Investment Schemes or Venture Capital Trusts and gifts to charity).

The main worry in relation to this announcement is the impact it will have on charitable giving and the charity sector has already expressed serious concern about how these plans may impinge on much needed donations. A statement in the Budget Report appears to show that the Government has recognised this issue and has agreed to “explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations”.

Tax on Trusts

Income from discretionary and other relevant property trusts over the standard rate band is taxed at the higher income tax rate.

The good news for these types of trust is that the trust rate will be decreased in line with the decreases in income tax from April 2013. The trust rate of tax will be reduced from 50% to 45% and the dividend trust rate will be reduced from 42.5% to 37.5%.

Other news in this area is that the Government will publish a consultation document in summer 2012 in relation to the simplification of inheritance tax charges for relevant property trusts, such as discretionary trusts.

Currently, a relevant property trust will be subject to inheritance tax charges every ten years and on transfers out of the trust (exit charges). For trusts of this type set up during life, rather than through a Will on death, there is an immediate 20% charge for inheritance tax over the nil rate band, £325,000.

The calculation of tax for these trusts is designed to produce the same amount of tax that would be produced if the assets remained in personal ownership and were transferred from one generation to another. It is thought that the changes proposed for this area will simplify the way the tax is calculated rather than changing the amount of tax that is generated.

If you have any questions about the above points or would like to speak to someone about tax planning, please contact Jane Molyneaux on janemolyneaux@boltburdon.co.uk or 020 7288 4771.

22 February 2012 by Matthew Miller

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THE NEWBUY GUARANTEE, Government Gimmick or a Helping Hand for Homebuyers?

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