Well. It could have been worse. But, it could have been a lot better……
Apparently there was no Black Hole. Whether the Chancellor and her Budget will get past the House remains to be seen, but, in the meantime, we need to digest some of the holes which have been dug for us.
The much trumpeted “mansion tax” turned out to be a surcharge on Council Tax for homes worth over £2m. That is going to require revaluations from the existing 1991 house values used to calculate Council Tax. Who knows what the ramifications will be for Council Tax itself? The surcharges will be £2,500 up to £7,500 for houses worth over £5m. So at that top level it is 0.15%.
This feels like the thin end of a wedge. Stamp duty used to be trivial, but successive Governments made it a policy tool to penalise landlords and second home owners and harvest tax. The unintended consequence – a barrier to house market entry and mobility. This new tax could creep along a similar path with higher future rates and thresholds.
Looking on the bright side there was talk of a “wealth tax” starting at £5m or £10m which would have captured all assets and with rates suggested at between ½% and 1% the mansion tax will collect only a fraction of what wealth tax would have collected from wealthier people.
There was slightly better (than last years!) news for farmers with relief at £1m per person transferable between spouses.
Those who rely on dividend and savings income or property rentals will pay 2% more income tax. Hmmm. We thought that income tax was not rising???
Those putting aside pension contributions by salary sacrifice will be limited to £2,000. You can only do that if you are literally a person who works. We thought that taxes on working people were not rising??? Perhaps “working people” as defined by the Government don’t have private pensions, dividend paying investments, savings income or property rents??? Let’s not let semantics get in the way of a Manifesto pledge.
The tax incentives for employee share schemes are being halved because they cost more that expected. That can only be because the objective of wider employee share ownership was being achieved!
On the basis that the absence of a positive can be a negative, the hoped for cuts in stamp duty did not materialise and barriers to getting on the housing ladder or increasing the rental stock remain. The 1.5m new homes target looks some way off.
Finally the cash ISA annual subscription limit reduced to £12,000 for the under 65s. That will point cautious low risk mid-life investors, perhaps saving to pay off a mortgage, towards higher risk investments in stocks and shares. That will pose an interesting challenge for their regulated financial advisers.
We will doubtless be speaking on what this means for us, but. whilst painful, this filler of a non-existent Black Hole is probably not the decisive factor in buying a one way ticket to a tax haven. Unless, that is, you want to escape to a place where they speak a language different from our Chancellor’s version of English. The incipient British Winter weather, though. That may tip the balance….
