There were, of course, areas where the Government were being put under pressure to make changes. This was especially the case in the area of housing where it was clear that the £60,000 starting point for stamp duty land tax was way out of line with the current average price of a first time purchase.
Those who jumped on the house purchase ladder some years ago now face another type of problem – that of a potential inheritance tax bill on the private residence on the homeowner’s death or the death of a surviving spouse. Here the problem was very much one of the nil rate band (the starting point for inheritance tax) not keeping up with house price inflation. The fact that the nil rate band has only increased by 18% over the last 8 years whilst house prices have increased by about 84% means that many more houses are caught. Indeed the results of one recent research indicate that as many as 2.4 million houses are caught. How would the Chancellor deal with this problem, if at all?
Whilst on the subject of inheritance tax, another question was whether we would be treated to more information on proposed regulations on the new pre-owned assets tax to go with last week’s press releases dealing with valuation (amount and dates) and family equity release arrangements?
And would any announcement be made on the post A-Day inheritance tax implications of the transfer of a pension fund (under alternatively secured pension) to a deceased member’s beneficiaries via a SIPP of which they were also members?
There were, of course, other areas where change could have taken place. For example:
- tax avoidance: would the Government announce an extension to the disclosure rules introduced last year?
- residence and domicile: would further action be taken to implement change following the consultative document in 2003?
- trust tax reform: whilst some measures have been implemented, a number are still in the consultation phase. Would these now be introduced?
And what did we get?
- Further extension to the anti-avoidance measure requiring disclosure of information on tax avoidance schemes to be given to the Revenue
- More specific anti-avoidance provisions
- An increase in the income tax personal allowance, age allowance and the CGT annual exemption
- Introduction of a standard rate band for some trusts and special treatment of trusts with vulnerable beneficiaries
- Announcement of further consultation on Real Estate Investment Trusts
- The announcement of further consultation on the subject of trust tax reform
- An increase in the threshold for stamp duty land tax to £120,000
- An increase in the nil-rate band for inheritance tax to £275,000 with a phased increase to £300,000 in 2007/08
- A commitment to keep the maximum annual ISA investment at £7,000 until 2010
- Tax equality for civil partners
In our view, it is important to ensure that you are equipped to have sensible discussions with your key clients and distributors (as appropriate) on the key taxation issues arising from this year’s Budget. Our Budget Bulletin seeks to provide you with the relevant information you need.