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Legal Updates

The budget 2016 – key announcements for private clients

12 April 2016 #Private Client


In his second budget earlier this month, George Osborne made a number of announcements affecting individuals.  We have summarised some of the most notable below:

Capital Gains Tax (CGT)

The higher rate of CGT has been reduced from 28% to 20% and the lower rate from 18% to 10% for disposals on or after 6 April 2016.  These lower rates do not apply where the gain is from residential property (and the property does not qualify for the principal private residence exemption).  In such cases the existing rates of 28% and 18% continue.  The aim is to incentivise investment and to ensure that the UK remains a competitive environment for entrepreneurial activity.

Stamp Duty Land Tax (SDLT)

Higher rates of SDLT will apply to acquisitions of additional residential properties, such as second homes and buy to let properties.  This came into effect on 1 April 2016.

Rates were increased by 3% for those buying second properties on or after 1 April 2016 as set out below:

Property or lease premium or transfer value

SDLT rate

SDLT rate (Additional properties)

Up to £125,000

Zero

3%

The next £125,000 (the portion from £125,001 to £250,000)

2%

5%

The next £675,000 (the portion from £250,001 to £925,000)

5%

8%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

13%

The remaining amount (the portion above £1.5 million)

12%

15%


Income Tax

The wear and tear allowance currently claimed by landlords letting furnished properties is being repealed and replaced with a new relief allowing landlords to deduct the actual costs of replacing furniture, furnishings, appliances and kitchenware in a let dwelling when calculating their tax liability.

ISAs

The annual ISA allowance is being increased from £15,240 to £20,000 from 6 April 2017.  The government is also introducing a new Lifetime ISA to assist those saving for a first home or for retirement.  For adults under 40 the government will add a 25% bonus to contributions up to £4,000 each year before the ISA holder reaches 50.

Inheritance tax – Residence nil rate band

The government confirmed that measures will be included in the Finance Bill 2016 to extend the inheritance tax residence nil rate band for those leaving their residence to direct lineal descendants to estates where the deceased downsized to less valuable property or ceased to own property on or after 8 July 2015.

Inheritance tax – undrawn pension funds in drawdown pensions

The government is including measures to ensure a charge to inheritance tax will not arise where a pension scheme member designates funds for drawdown but does not draw all the funds before death.

ISAs – Estate administration

Changes are being made to ensure the ISA savings of a deceased continue to benefit from tax advantages during the administration of their estate.

International individuals

A number of reforms are being introduced with regards to the taxation of non-UK domiciled individuals from April 2017.

Increased civil sanctions for offshore tax evaders

Draft legislation has been published for consultation increasing the minimum civil penalties and amendments to the naming and shaming provisions allowing individuals to be named.

Clarkslegal, specialist Private Client lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Private Client matter please contact Clarkslegal's private client team by email at privateclient@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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