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Osborne Stamps his Authority

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3 December 2014

A cool, calm, confident and, at times, witty, Chancellor delivered his final Autumn Statement before the 2015 General Election.

To be fair, he had pretty good reason to be the first three of those things, with figures and forecasts looking better than they did just nine months ago at the Budget.  The growth forecast has been increased for the current year from 2.7% to 3.0% and he was keen to point out that the UK is the fastest growing major economy in the world, seven times the growth of our neighbour, France.

Unemployment is also down from 8% when the current government came to power, to 5.5%. Whilst it is forecast that UK will be in surplus to the tune of £23bn by 2019/20, he failed to mention that it was originally his plan to achieve a surplus before the end of the current parliament.

On tax measures, there is going to be further legislation to block perceived loopholes covering a whole range of taxes.  These include corporation tax on multinational corporates who “artificially” divert profits offshore, where a new 25% tax rate is to be applied, a huge change by removing the availability of Entrepreneurs’ Relief on goodwill when incorporating into a connected company and stamp duty on corporate takeovers.

The annual tax charges on corporates holding residential property are to be increased by 50% above the rate of inflation, whilst the charges for non domiciled individuals who operate the remittance basis are to be increased to £60,000 if resident for 12 out of 14 years and to £90,000 for those who have been resident for 17 out of 20 years.

There were also a number of giveaways.  The Research and Development tax credit is to rise from 225% to 230% for small and medium businesses and from 10% to 11% for large companies.

Fuel duty is to be frozen again, whilst air passenger duty from next year is to be abolished for the under 12’s, extending to cover all under 16’s from 2016.

Pension reform was also covered, with the 55% rate applying on death abolished, so that funds can be passed to loved ones tax free, whilst this generosity also extends to the continuing tax free status of ISAs passed to spouses on death.  From a cynic’s viewpoint, you could argue this generosity is purely an attempt to encourage private pension contributions, because it’s unlikely the state pension pot will last for ever!

Then came the big announcement, a complete overhaul of stamp duty land tax for residential properties.  Gone is the long hated “slab” system and instead is to be replaced with a progressive system from midnight on 3 December 2014.

The new table is as follows:

£0-£125,000 0%                                          
£125,001-£250,000 2%
£250,001-£925,000 5%
£925,001-£1.5m 10%
Over £1.5m 12%

A comparison to the current regime shows that only homes purchased for more than £937,000 will be worse off, which represents approximately 2% of homes.  It is predicted to cost the Exchequer some £650m each year.

Those who have exchanged contracts before the new regime comes into force will be able to choose which regime to pay tax under, meaning some 98% will probably choose the new!  I am sure many will hope that this will be a boost to the property market, particularly for first time buyers.

The wit in the speech came from the suggestion that a certain Labour leader may be able to take on the voiceover work for Wallace due to the retirement of Peter Sallis and, potentially, Mr Milliband being out of work. As to who will be laughing last come 8 May  2015 - this remains to be seen!
 
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