George Osborne delivered his revised Budget speech. Experts from leading law and professional services firm Gordon Dadds comment as follows:
Roger Harding, Tax Director:“There has been speculation about changes to the non-dom rules but no one could have predicted that the Chancellor would go this far. The move to abolish non-dom status for anyone who has been resident in the UK for more than 15 out of the last 20 years will affect a considerable number of people. It will be interesting to see how many choose to leave as a result: presumably the Chancellor is banking on the fact that anyone with 15 years plus in the UK has too many ties to leave. However, many non-doms with less than 15 years may also look to move, rather than watch the clock.
“The Chancellor’s move to increase NIC Employment Allowance from £2,000 to £3,000 per year will make life easier for smaller businesses and should encourage growth in this area. Interesting to see however that he is wary of tax avoidance: the move to stop companies where the director is the sole employee from claiming NIC Employment Allowance will affect many. The consultation on abolishing Class 2 NICs and reforming Class 4 NICs suggests that this is also a prime target.
As predicted, higher earners are going to see a raise in CGT: investment fund managers in particular have been targeted in relation to the carried interest CGT liability many have escaped paying in recent years. The news of a consultation on fund manager’s performance related returns will also raise some hackles in the financial sector. During the election campaign the Conservatives discussed restricting pension tax relief for the highest earners. These changes have now been introduced. The taper relief for those with total income over £150,000 fits in with the mantra of a Budget for working people. The Chancellor has also announced a consultation on reforming pensions tax relief and it will be interesting to see the results: we may yet see more major changes to the pensions regime”.
Robert Young, Consulting Actuary said: As widely anticipated the Chancellor in today’s Budget took steps to limit the tax relief available to those on the highest incomes. He did not remove higher rate tax relief as some expected so for anyone earning below £110,ooo there is no change. However from April 2016 for those with adjusted income of £150,000 or more (this to include any employer pension contribution) the annual allowance will be tapered so that it gradually reduces, thus restricting tax relief available. For high earners there is an opportunity to maximise contributions in the 2015/16 tax year including and carry forward allowance and receive full tax relief”.
Possibly more interesting is the consultation that is being launched with regard to the way in which tax relief is granted. Currently we have pensions which operate on an Exempt-Exempt-Taxed basis as broadly you receive tax relief on contributions input and investment return but income taken out is taxed, and we also have ISA’s which operate on a Tax- Exempt – Exempt basis. One option the Government wish to consider is to bring these into line with pensions moving to the ISA model.
Although this would be simpler starting from a blank sheet, given that many have pensions already in place and with the number of employees with pension arrangements growing as a result of Automatic Enrolment this could result in yet another change to how pensions operate and to pensions becoming even more complicated. This could create yet another tranche of pension to be worked out in a different way. The pension industry is, however, being given an opportunity to comment with a full range of options from adjusting current lifetime allowance and annual allowance to a “merger” of pensions and ISA’s on the table before any final decisions are taken.”