The Budget at a glance

Higgs & Sons' Ian Smith gives a Private Client practitioner's view of the recent Budget:

The nil-rate-band threshold
As expected, the NRB will increase to £325,000 this tax year and to £350,000 in 2010.  Thereafter it will be index linked but the Finance Bill will contain a provision preventing it from falling in value.

The Treasury will apparently publish simplified financial guidance to Will makers 'shortly'. 

Agricultural property and woodlands relief
APR and woodland property relief is to be extended to apply to property across the European Economic Area.  This move has allayed fears that the government might withdraw the relief or severely limit it after the EU commission declared that the relief's application to property in the UK, Channel Islands and Isle of Man was a breach of treaty.  The relief is retrospective and applies from 22 April 2003. From 22 April 2009, qualifying property will also qualify for CGT hold-over relief.

Change of income tax rates for discretionary trusts
From April 2010, the rate of tax on income received will be 50% and 42.5% for dividends (in line with the new higher rate income tax on individuals with income exceeding £150,000pa). 

Trustees may consider distributing income to beneficiaries who pay lower tax rates who can reclaim tax at source.  A review of the trust's pool of tax credits may also be required.

It is thought that the new rate will encourage trustees to invest in non-income producing assets in the hope of paying the lower CGT rate. 

Charities - substantial donor test
The Treasury has announced anti-avoidance measures where it is suspected that substantial gifts to charity have been made as part of a tax avoidance plan.  

Pensions 
The pension lifetime allowance and annual allowance has been limited to £1.8million and £255,000 respectively from 2010-2016.  This will affect clients with substantial private pensions and final salary schemes.  

Domicile and offshore tax
The Treasury is making moves to simplify the non-dom tax regime and has announced plans to tighten anti-avoidance measures and publish the names of offenders.  In the meantime there is a New Disclosure Opportunity which begins in the autumn for UK residents in relation to unpaid tax on offshore accounts.  The government intends to introduce new legislation about the tax treatment of offshore funds generally as of December this year.  

Reporting Changes and Penalties
From April 2010 HMRC will alter the record keeping requirements for capital taxes as well as changing the period in which refunds for over payment of tax may be made.  There is also a new penalty regime for the late filing of returns and payment of tax.    

For more information about Higgs' Private Client department please click here or contact Ian Smith on 01384 342100.

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