Personal - first-time buyers receive stamp duty boost

Stamp duty land tax

A new relief is to be introduced for first-time buyers within England, Wales and Northern Ireland that will raise the price at which a property becomes liable for stamp duty land tax (SDLT) to £300,000.

Those claiming the relief will pay no SDLT on the first £300,000 of the consideration and 5% on any remainder. No relief will be available for first-time-buyers paying more than £500,000.

The new relief will apply to transactions with an effective date on or after 22 November 2017. However, from 1 April 2018 Wales will assume responsibility for setting its own land transaction tax rates.

The changes do not apply in Scotland.

SDLT higher rate changes

Minor changes to the operation of the SDLT are introduced to grant relief from tax due under the higher rates and will have effect for transactions on or after 22 November 2017.

These are announced in the Budget as follows:

• a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence
• a person buys property from their spouse or civil partner
• a person buys a property in a child's name or on a child's behalf, where they are doing so in their capacity as the deputy of that child
• a purchaser adds to their interest in their main residence.

A new rule to prevent abuse of relief for replacement of a purchaser's only or main residence is introduced, by requiring the purchaser to dispose of the whole of their interest in their former main residence and to do so to someone who is not their spouse.

Personal allowance 

The tax-free personal allowance will increase from £11,500 to £11,850 from 6 April 2018.

Higher rate threshold 

The basic rate threshold will increase from £33,500 to £34,500 as of 6 April 2018. This means for most people the higher rate threshold will increase to £46,350.

Different thresholds may apply in Scotland.

Capital gains tax 

The capital gains tax (CGT) annual allowance will increase from £11,300 to £11,700 for individuals and from £5,650 to £5,850 for most trustees of a settlement from 6 April 2018.

The government’s intention to introduce a 30-day payment window for CGT payments due on the disposal of residential property will be deferred until April 2020.

With effect from 22 November 2017, the transitional provision which excluded sums of carried interest arising after 8 July 2015 and in connection with the disposal of a partnership will be removed, irrespective of any connection with disposals made prior to 22 October 2015. This means asset managers will pay CGT on their full economic gain.

National insurance contributions 

The implementation of the proposed reforms to the national insurance contributions (NICs) system, to include the abolition of class 2 NICs, will be delayed by a year and will now take effect from April 2019.

As previously announced, the proposal to increase class 4 NICs from 9% to 10% in April 2018 and then to 11% in 2019 will no longer proceed.

National living wage and national minimum wage 

The national living wage will be increased from £7.50 to £7.83 per hour from April 2018, for those aged 25 and over.

The national minimum wage rates will also increase as follows:

• apprentices: £3.70 per hour
• 16 and 17-year-olds: £4.20 per hour
• 18 to 20-year-olds: £5.90 per hour
• 21 to 24-year-olds: £7.38 per hour.

Marriage allowance 

Legislation will be introduced in the forthcoming Finance Bill to enable individuals whose spouse or civil partner is deceased to make a claim for the allowance. 

Provided the entitlement conditions are met, the claim can be backdated for up to 4 years.

Savings and pensions 

The 0% starting rate for savings will be maintained at the current level of £5,000 for 2018/19.

The annual subscription limit for an individual savings account (ISA) remains unchanged at £20,000 for the 2018/19 tax year. The annual subscription limit for junior ISAs and child trust funds will increase from £4,128 to £4,260 from 6 April 2018.

The pension lifetime allowance will increase to £1.03 million for the 2018/19 tax year.

Gift Aid donor benefits 

The current mix of monetary and percentage thresholds that determine the value of benefit a charity can give to donors will be changing as of 6 April 2019. 

The new thresholds will be as follows:

• the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation
• charities will be able to offer an additional benefit of up to 5% on donations on the amount in excess of £100. 

The total value of benefit a donor can receive from the charity will remain at £2,500.

Mileage rates for landlords

Landlords running unincorporated property businesses made up of only individuals will be able to use mileage rates to calculate a deduction for motoring expenses from 6 April 2017. 

Previously, landlords could only technically claim a deduction for actual motoring expenses incurred and capital allowances for the cost of the vehicle.

Venture capital schemes

An increase to the annual amount an individual can invest under the enterprise investment scheme (EIS) in knowledge-intensive companies (KICs) will take effect from 6 April 2018. 

Provided that anything above £1m is invested in knowledge-intensive companies, an individual can invest up to £2m in total. 

A knowledge-intensive company is regarded as a smaller innovative company carrying out research and development and other activities to develop intellectual property for its own trading purposes.

A new ‘risk to capital condition’ will be introduced for investments made on or after 6 April 2018 when deciding whether an investment qualifies for tax relief using the EIS, seed enterprise investment scheme (SEIS) and venture capital trusts (VCTs). 

The condition has 2 elements. First, the company should have entrepreneurial objectives to grow and develop. Second, there should be a significant risk of a loss of capital to the investor greater than the net return. The net return is considered to be income or capital growth and any income tax relief.

Termination payments 

Individuals who have their employment contract terminated on or after 6 April 2018 will no longer be able to claim foreign service relief if they are UK resident in the tax year of termination. 

The statutory residency test will be used to determine an employee’s residency status and the existing £30,000 income tax exemption will continue to be available, where applicable. 

The withdrawal of the foreign service exemption will not apply to seafarers.

Qualifying care relief 

A carer previously excluded from the qualifying care relief scheme because the person they look after self-funded their care, will be entitled to use the simplification scheme for 2017/18 onwards, instead of only being entitled to claim for expenses they actually incur. 

The person funding the care will be required to pay the carer through an approved shared lives scheme.

Venture capital trusts 

A measure is announced that seeks to limit the scope of an anti-abuse rule relating to share buy-backs by venture capital trusts (VCTs).

The rule restricts income tax relief for investors who sell shares in a VCT and subscribe for new shares in the same or another VCT within a 6-month period, where those VCTs merge. 

This rule will no longer apply if those VCTs merge more than 2 years after the subscription, or do so only for commercial reasons.

The change will have effect for VCT subscriptions made on or after 6 April 2014. 

Contact us to discuss how Autumn Budget 2017 may affect you.