The Chancellor’s third Budget contained no hidden surprises and plenty of optimism.
Many high net worth individuals have been concerned about the growing calls to focus taxing measures on the wealthy. The UK government however has delivered a clear message that they have no appetite to do so, with most of the measures previously announced (rise in National Insurance Contributions, tax on dividends and Corporation Tax) being confirmed. In effect, the wealthy will of course pay for most of the tax collected (as they have the largest amount of income and profits to tax), but by taking a more general approach to taxation, the government has helped the UK strengthen its reputation as a stable jurisdiction for high net worth individuals.
Despite the Office of Tax Simplification publishing recent reports on the possible reform of Capital Gains Tax and Inheritance Tax, the Chancellor made no changes to these taxes and the generous reliefs and exemptions currently available.
With the recent SDLT holiday, the UK residential property market has been particularly buoyant. Many individuals disposing of second homes or investment properties, however, may not have been aware of the requirement to file a Capital Gains Tax return and pay any tax due within 30 days of the disposal. The extension of this deadline (which also applies to trustees) to 60 days is therefore very welcome in helping individuals have sufficient time to meet their filing obligations.
There has also been no mention of changing the remittance basis of taxation, the beneficial tax regime for international individuals who relocate to the UK. Considering the uncertainties caused by Brexit, many non-UK domiciled individuals will welcome having certainty of the tax rules affecting them.
The changes previously announced concerning Corporation Tax and dividends will impact many individuals, especially those with interests in UK corporate structures, including family investment companies. As the tax changes come into effect next April, we recommend clients review existing structures now so any appropriate steps can be taken before then.
Certain measures such as the supplemental 4% of Corporation Tax for residential property developers with profits of more than £25m are targeted to specific sectors. However, many private clients and family offices have become involved with UK residential property development, and so existing structures should be reviewed in light of the proposals.
Overall, this was an incredibly optimistic Budget, with strong predictions about the growth of the UK economy. It will be interesting to see if the Chancellor is able to make good on his stated intention for tax rates to go down by the end of the current Parliament.