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More tinkering with tax relief? What you can expect from the Autumn Statement

The Government is looking into a number of tax changes that could hit savers.

For the first time, Chancellor George Osborne has some good news to deliver in the upcoming Autumn Statement on 5 December.

The Bank of England has upgraded growth forecasts from 1.5 per cent this year to 1.8 per cent and from 2.5 per cent to 2.8 per cent in 2014.

But away from the growth figures, there are a number of tax changes the Government could make next month which could hit investors. Here, we take a look at what to expect.

Isa reforms

The Government was attacked for floating the idea of capping the Isa allowance at £100,000 over the summer.

The Treasury was quick to reject the suggestion but the idea was clearly up for discussion.

Association of Chartered Certified Accountants head of taxation Chas Roy-Chowdhury believes the Government cap future allowances for Isa millionaires.

He says: “This Government is very good at messing up people’s long-term plans. It needs to be careful as it would be unfair to retrospectively change a regime.”

Former Treasury financial secretary Mark Hoban was seen as a barrier to reforms of Isas but his successor Sajid Javid is said to be more open to change.

Meanwhile, the Building Societies Association wants the Isa cash allowance doubled to £11,520 and for the Government to pay up to 50p in the pound for first-time Isa users.

It also wants the Government to allow transfers from child trust funds to junior Isas.

Following the move last year to allow Aim stocks to be held within Isas, Tisa is calling for peer-to-peer lending to be a qualifying Isa investment. It also wants Isa allowances to be transferred to spouses on death.

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Capital gains tax

Osborne has floated the idea of charging non-residents capital gains tax for the first time, in a bid to cool London property prices fuelled by foreign investment.

The Government introduced a 7 per cent stamp duty on homes worth more than £2m last year, though this did little to dampen prices.

Personal allowance

Deputy Prime Minister Nick Clegg wants the allowance to rise to £10,500 in the next Budget.

The Liberal Democrats also want it to increase to £12,500 in the next parliament and the Tories are considering matching the promise.

Hargreaves Lansdown head of financial planning Danny Cox says: “The age-related personal allowance is £10,500 so it would not take a huge leap of faith for the main personal allowance to go up. The Lib Dems are on a bit of a roll now so I can see them increasing it again.”

Baker Tilly senior tax partner George Bull says increasing the personal allowance could be seen as “buying votes” ahead of the election, though says the parties may look to save such a big gesture for next year. 

Pensions tax relief

Last year’s Autumn Statement set out plans to cut the lifetime allowance from £1.5m to £1.25m and the annual allowance from £50,000 to £40,000 from next April.

The Treasury opened a debate to tax relief changes this summer and the influential Pensions Policy Institute has laid out options for reform.

Behind the scenes, the Government has floated cutting the amount that can be as pension tax-free cash from 25 per cent to 20 per cent.

Bull says: “If there is to be a change to the lump sum, it would horrendous if it was introduced from either December or next April. People need time to plan.”

IHT and pilot trusts

HM Revenue & Customs launched a consultation in May on changing the rules that apply to multiple pilot trusts.

HMRC wants the £325,000 nil-rate allowance for each split trust, which is granted before a 10-yearly, 6 per cent tax charge is levied, to apply to all trusts set up by the individual.

The Autumn Statement may see further movement on this policy and further clarity about whether these rules will be brought in retrospectively.

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