Many had understandably termed this the most important election in decades, but even then no one predicted what has actually just happened – the complete recasting of the British political landscape. It can only be assumed that a number of parties will be rethinking their approach, federalism might come to pass after the SNPs near total victory in Scotland, and the night saw very significant gains for the Conservatives across England. Pollsters will meanwhile be asking themselves some rather serious questions. Amidst this turmoil and excitement, what of the rather more sober subject of tax?
Calmer times for non-doms?
We had been promised the abolition of the remittance basis by
Labour, but the Conservatives will not entirely leave non-doms
alone. Their manifesto promised increases in the remittance basis
charge and to 'continue to tackle abuses of the system';
expect in particular a reform of the rules under which non domicile
status can be inherited and the treatment of long-term non-dom
residents in the UK.
If there are to be changes to the remittance basis, let us hope
that the opportunity to ensure the remittance basis operates in a
rational and straightforward way is seized. This would be good for
simplification, for certainty and for precluding ongoing debates
about further reform.
Less complexity in property taxes?
After reports of a serious stagnation in the upper end of the
property market, with many not purchasing properties for fear of
the implications of mansion tax under either the Labour or the more
lenient Liberal Democrat proposals, those living in moderately
sized London properties (or small apartments in some areas) will
breathe a sigh of relief.
A Mansion Tax is no longer in contemplation, what can't be
ruled out though is some review of the council tax system or a
revaluation of properties. This has been too thorny an issue to be
grappled by any recent administration, it really does seem more
sensible to simply review council tax rather than layer additional
complex property taxes upon the already increasingly complex system
of property taxation in the UK. Hopefully any review would be
combined with a general overhaul to increase supply of and access
to housing, so that those increasingly left behind by price rises
are properly considered, on the other side of the equation.
Higher earners
Given the Conservative promise not to increase direct tax rates
(although do note this specifically does not preclude stealth rises
such as frozen personal allowances) higher earners will be pleased
that the 50p income tax rate is not in the offing again.
That said, pensions remain a big issue, and higher rate tax relief
will be progressively restricted for those earning between
£150,000 to £210,000 per annum so that only up to
£10,000 of pension contributions will get tax relief rather
than £40,000 as is currently the case and will continue to be
the case for those earning less than £150,000 a year.
High earners may wish to consider advancing regular pension
contributions to ensure that they benefit from the full tax relief
before the new Government's first budget.
Family homes and IHT
A key Conservative manifesto promise (to be funded by the
restriction of pension tax relief) was to take family homes worth
up to £1m out of IHT, which will be welcomed by many,
especially where values have increased to an unexpected and
unprecedented extent, reflecting general property price increases
in some areas. Equally, this can lead to distortion where there
have not been such price increases, so that increasingly large
properties are exempt.
What remains to be seen is whether there will be a more thorough
review of the IHT nil rate band set at £325,000 per person,
or £650,000 between a couple and whether the Conservative
policy to raise the nil rate band to £1 million for all
assets, or even abolish the tax entirely will be revived in a
Conservative majority Government.
What now?
It remains to be seen whether there will be an
'emergency' budget, there will have to be a second Finance
Bill this year and it seems fair to expect an announcement in short
order, if for no other reason than this will not be a coalition
government, and the Conservative party will have unfettered access
to the statutory cookie jar. No doubt consultations or promises of
consultations on a range of topics, quite possibly including IHT,
pensions and domicile, will be announced.
It seems, and is certainly to be hoped, that taxpayers can look
forward to rather more certainty than they had dared expect, and
although one should certainly anticipate changes to the remittance
basis, pension tax relief these may now be a rather less radical
than had been imagined.
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