Simple... and familiar
There are a couple of eye-catching measures of significance for investment and business in the pre-Budget report.
The first and most important is a simplification of capital gains tax. And it seems to be a bold simplification. It looks as though there will be a single CGT rate of 18 per cent. No more tapers depending on how long assets are hold. No more distinction between so-called "business" assets and non-business assets. Just a single rate of 18 per cent.
That would be a great benefit to most people who buy and sell shares or other assets. But it will mean that private equity and those who own shares in their own companies will pay a higher rate of tax - because the 10 per cent rate for them, payable if they hold their assets for two years, will go.
Anyway, don't get carried away with excitement. It is a tax raising measure - and will raise between £700m and £800m a year.
There will also be an attempt to raise more money from those allegedly wealthy people who classify themselves either as non-domiciled or non-resident. Non-doms who have lived here for more than seven years will pay a flat rate of £30,000 for the privilege of being non dom.
If that looks familiar, it is. George Osborne, the shadow chancellor, proposed something very similar (though he thought it would raise significantly more than the Treasury claims).
The reason for excluding those who have lived here for less than seven years is not to scare away the bright foreign bankers who come to the City for a few years and then go elsewhere.
And there appears to be bad news for the separate category of non-residents, who arrive on a Monday and jet back to Monaco or some other tax haven on a Friday, in order to minimise tax payable here.
The day they travel will now count as a whole day in the UK, which means they will be able to stay in the UK for much less time than hitherto if they want to preserve their privileged tax status.
I imagine that Sir Philip Green, who does the Monday to Friday commute, may feel a bit grumpy, as will others of the Monaco set.
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At the moment, every policy announcement looks as populist measure rather than substantial step towards the real prosperity of the economy. - very unlike what Gordon brown promised while taking reins from Tony.
Has no-one else spotted that the £600,000 inheritance tax threshold for couples, going up to £700,000 by 2010 is exactly the same threshhold as was announce nearly 6 months ago in the budget, except with the clever spin of '2 people means 2 threshholds'? How many will be sucked in by this?
Seems like Darling has been busy reading George Osborne's proposals. This Government has no shame! Labour Out!
why can't any politician ever be straight with the public? It seems there is no real change in IHT, all the usual suspects get budget increases and somewhere in the smallest of print, us, the fleeced tax payer will no doubt get fleeced some more so the government can waste more. surely time for some honest accounting or is that a contradiction in terms? sir humphrey appleby lives on.
I have a firm recollection that the change to count days of travel as days in the UK had either been announced or heavily trailed before the summer recess.
Richard Marriot: if you think they are good proposals, why are you upset that Alistair Darling is introducing them ? If you think they are bad proposals, why would you want to elect the people who put them forward ?
Andrew, "2 people mean 2 threshholds" is not just spin. At the moment if one partner leaves everything to their spouse, and then the spouse dies, the spouse only gets one IHT allowance, so IHT may well be payable. People currently try to get round this by leaving their house directly to their children but not everyone wants to trust their children with the family home while their partner needs it.
Allowing both of a couple's IHT allowances to be used will effectively take EVERY couple's estate under £700000 out of IHT.
Inheritance is unfair. Why should someone get a tax free windfall through no merit of their own. Inheritance tax thresholds should have lowered not increased
I see the tory supporters here really don't get it - the new thresholds are transferrable on death, so if a spouse dies their whole threshold can be transferred to the survivor for them to pass on along with their own amount when they die. Hence it is a doubling in the effective threshold for almost all cases. That's why it's retrospective to existing widows/widowers.
IHT change = NO Change from previous proposal and same as Tory boy Osborne.
When do we see something in our favour!
i suspect george osborne's inheritance tax plan was a naive attempt to preempt the government's far more sensitive/sensible,if not particularly socialist,approach to a fairly significant problem for a growing number of the populace.darling's numbers look decidedly more realistic.
incidentally,andrew, the £600,000 is available to widows and widowers.
Frankly this is a disaster of a statement for small businesses. The taper relief on cap gains was a fantastic mechanism to encourage investment in the firm. What makes it particularly hard to swallow for people like me who have invested years in growing small businesses is that it comes on top of the upward revisions in small companies corporation tax and worse still the abolition of the 0% rate for the first 10,000. All in all this government is now looking like the least entrepreneurial ever…
Surely Darling's measures for IHT are just giving us what we already have? Anyone with more than £300k of assets should have set up a nil-rate band discretionary trust as part of their IHT planning, which effectively does a pretty similar thing to what old Captain Darling is now "allowing". Oh the spin of it!
to post#2 - I think you've misunderstood: it isn't simply that he's saying that a married couple together have a £600k allowance (by doubling individual allowances) but that he's saying this total allowance transfers to the surviving member of the couple when one dies - so a widow or widower then has an allowance of £600k when they die...
Dreadful, dreadful, dreadful, dreadful. I have been creating employment in this country, contributing to our exports and paying all kinds of company taxes for years and years. And now, for my pains, I am to be taxed at 18% if I sell my shares in my own company. What kind of incentive is THAT? GET OUT LABOUR. You are a disgrace.
Come on 91Èȱ¬ - report the TRUTH - the Inheritance tax announcement is no more than a typical lying bit of spin - the same old 'spin' we have been given for the last 10 years !
Any sensible 'couple' with a substantial inheritance tax liability will have already put plans in place to use their 2 allowances - so this announcement is only good news for the ignorant or the lazy - typical 'nanny state' telling us they are doing us a favour !!!
Is this the kiss of death for SAYE share save schemes?
Thank-you for the 80% tax rise. I gave up a City job to build a business in the UK, risking all. My thanks for creating 25 jobs... 18% tax rate if I sell the business. With this level of volatility in tax rates, I plan to pack my bags and leave for more a country where tax rates are not subject to such wild swings.... jut as soon as I have delivered on my promises to my stakeholders.. an interesting concept that the government could learn from. Hello USA.
The £600,000 inheritance threshhold seems to be a con. If you manage your tax affairs properly and set up a trust to put the first spouse's inheritance tax limit into on their death, you can effectively pass on double the limit already.
This seems to be another example of presentation over substance and a knee jerk reaction over the popular proposal from the Tories.
As recently as January this year the Revenue assured us (see
that the day count rule would stay. Now in a complete panic this volte-face. Robert, I don't suppose you could find out whether the Revenue said one thing and actually thought another or name the panicking politician who signed this off?
I don't want to see the Monaco set stay at home, working on their laptops. The point many miss is that they pay UK tax on their UK earnings - there is no double tax treaty between the UK and Monaco. Why chase them away for the sake of tax on their world wide income and gains? This has not been thought through.
Do you think you could get an admission? Was it 'bottler' or 'puppet'?
#18: "if you manage your tax affairs properly"
This is the whole point. People do not. We tried, and tried, and tried to get my wife's mother to consider setting up trusts etc. and she would not because she did not want the money to be "tied up in case she needed it". I suspect a great number of people are in that position. If this rule had been in place two years ago there is no doubt that we would have saved £47,000.
can't see Mr. Green worrying about £30k surely?
Disappointing. A Labour chancellor bows to mean-minded Right wing papers, and to pay for it, penalises businesses of all sizes - hoping that the public will see it as 'squeezing the fat cats', never mind that businesses (rightly) find a way to pass on the costs. Reminds me very much of the whole "1p on NI", which was actually 2p but the second penny came straight from employers without showing up on workers' pay packets.
To Tim King and Kevin.
Thank you for making very valid points. There are no winners, neither the UK or the persons concerned. A short-term increase in tax and then the take falls. Why can't the Govt think before the knee jerk reaction. If you think I am kidding look at the IR35 excercise, a fair amount of contractor's work left the UK and so the govt earned no taxes on the lost income and the economy lost the jobs!
There is nothing wrong with taxation despite the rubbish spouted here and in golf clubs. We none of us want to pay it but we all benefit from it. These posts would be slightly interesting if they debated how much is spent where. Most of these posts are self serving nonsense. If the average tax burden was 1% the Daily Mail and Taxi drivers would whine about that too. And before you sterotype me I pay £300,000 pa in Tax and am Happy to pay.
There is one fundamental difference between the proposed new arrangements and using trusts to try to circumnavigate the current system. If you use a trust under the system we have at present, it is only a potentially exempt transfer. If you die within 7 years of making the transfer, an IHT liability still exists (albeit reduced depending on how many of the 7 years have passed).
Under the new system, both spouses can die on the same day and still get the combined £600k nil rate.
When the major source of 'wealth' taking people above the IHT threshold is, for many, the family home, not everyone can afford to pay a lawyer or accountant to set up a properly constructed trust to attempt to mitigate any liability they may have.
Perhaps it's the lawyers, accountants and other so-called IHT planning specialists who will be the real losers under the new proposals. That would be a real shame now, wouldn't it?
I know the people who just want lower taxes on everything will not agree with this, but the inheritance tax move is a negative one.
It means that the divide between rich and poor will get yet wider. Already this country is split between people who get to inherit cash windfalls and properties worth hundreds of thousands of pounds for no reason that the luck of who their parents were and those people who get to inherit zilch.
As someone who's worked very much more than 37.5 hours per week - sometimes well over double that - for the last 9 years building up a business, a significant increase in CGT is a slap in the face.
We want to cash in our asset at some point - why should't we? I have a family who have paid the price. My partner and I have worked incredibly hard, paid corporation and personal income tax annually, and at a level that I'm well aware would keep several low-income families provided for.
I'm used to people being envious of the growth of our business, which I know is entirely due to our hard work. Anyone else is welcome to do the same, and, unless they plan badly or are very unlucky, would achieve something similar.
No one has ever expressed envy at our long hours or ongoing, voluntary acquisition of skills.
An increase in CGT will undoubtedly reduce our committment to working within 'the system' and we are looking at all possible legal means of reducing the proportion of our turnover and eventual business sale value which will be subject to this 'tax on hard work' - even if it means making our business smaller, or transferring assets or capital outside the UK.
Gordon Brown, please be aware: I used to vote Labour because I thought it was fair for most people. Not any more - it's every man for himself, which I don't believe is what socialism is about. Do you?
We need public services to survive as an industrial nation, therefore we need taxation to fund these services. It is surely now time that the Government, especially the "Sir Humphries" use of those funds is interrogated with the same vigour and punitive excess that is applied to small businesses in this country, then we may get some accountability. While the "rules for us and the rules for them" system exists people will become more alienated and dissaffected with government leaving them to look for other means (most of them socially undesirable) to restore the balance.
Kevin, as I understand it, the day rule applies primarily to people claiming to be non-resident by virtue of the fact that they spend less than 90 days per annum in the UK. These people then are not liable for any UK tax.
The Labour Party deserves to lose the next election because it is politically inept. The big headlines on IHT prove to be worth nothing to a middle class voter who thinks.
The vast majority of people work for small businesses and they will learn, pretty smartly that the CGT will stop people investing in their jobs and so another needed voter group will be disaffected.
Finally, the Non Dom tax won't change one iota the voting of those most vociferously demanding it. On balance no votes gained for a lot of fluff but many lost for ineptitude.
Hi Nic, this is exactly my point. The media and politicians looking for easy targets have given the impression that the Monaco set pay no tax. This is not true and not wanting to spoil a good headline, the media are not providing fair coverage. I am sure the many good tax advisers they know tell them this but it just does not fit with the envious "rich not paying tax" theme to all the recent reporting. Nearly all UK sourced income is subject (tax treaties allowing) to UK tax and in the case of earnings please see the tables at 5.19 here: for proof that this is the case.
Re. Post #27
Well spoken Ben, my wife & I feel exactly the same.
Years of hard work (not luck!) building up a medium-sized business, giving rewarding employment to over 90 people and providing a good and steady supply of cash for the chancellor to distribute amongst the worse off in the process is rewarded by a near doubling of tax when it's time to retire - simply shameful!
Where's the incentive to strive for a more successful and better business when Gordon (using his puppet Darling) just comes along and sits down on my lap, busily fingering my back pocket for more of the hard earned rewards for my family.
The Tories may not appear as a hugely capable alternative at this moment but guess who will get our vote when Gordon finally dares (is forced) to ask us for our verdict!
goodness,
dont people talk a lot of rubbish. The only sensible comments about IHT are the ones that point out that the current proposals mean that everyone with an estate over 300000 will benefit. There is a cost both in time and money involved in setting up a trust properly, there is a high degree of trust required and unless it is set up properly tax could be payable anyway. to my mind this is a benfit for anyone who has an estate worth more than 300000
I totally agree with message No 27
What is the incentive to build up a business as a means of securing my future.It seems that the ability to pay is more important than the abilty to earn.Fair enough then I may choose not to earn as much. Change to cgt is another reason to downsize and have an easier life. Time to let someone else make their "fortune" enjoy the stress!!
to all those asking why they should slave hard to earn their fortune, can I just point out that most of us do that anyway, and will continue to do so regardless of the tax rate.
The change to a standard rate of 18% capital gains will benefit a lot of people, and regardless of how the tax was changed, there will always be winners and losers.
I agree its a bitter pill to swallow, especially for those who have built up their businesses from scratch, but lets face it, we get taxed in every area of our lives, and this is just another.
Anyway, what do I care, the IOM has just introduced a max cap on personal tax of £100k!
> I imagine that Sir Philip Green,
> who does the Monday to Friday
> commute, may feel a bit grumpy
Yes, but that's only one of the great advantages of these changes! Another advantage is that the balance is changed from those who have made money (and are trying to hold onto it) towards those who want to make a lot of money quickly.
This is a great way to keep people working hard, rather than slacking off and taking it easy. Investors don’t get "money back for long service" anymore – they’ll be taxed no matter how long they hold on to it. This is good for society, as it gives newcomers a leg up, as well as giving the old-timers a little "help" on their way down! Let’s have more of it.
> Anyway, what do I care, the IOM has
> just introduced a max cap on personal
> tax of £100k!
Yes. It could even be the case that 91Èȱ¬
people could operate out of that low tax
zone, taking wages from the high taxes of
mainland residents to provide radio shows
for the British Broadcasting Corporation,
while residing in an offshore location
themselves. What an irony that would be, eh?
And it is certainly possible, given the
technology available today.
Re post 25. Please try and ensure you are factually correct before making comments.
The £600,000 threshold was available to couples by using their wills before Tuesday. On first death a trust would be created by the deceased for the nil rate band amount, £300,000. Then on second death another £300,000 could be used bringing the total to £600,000.
As this is done on DEATH, it is not a Potentially Exempt Transfer and no seven year rule applies. If you are going to insult IHT specialists (I am one by the way) at least get your facts right!
There has been no change in IHT, just the application of the rules. It would still be worth coupes looking at using a trust on first death to protect assets from long term care cost, protecting the marriage assets for the children should the surviving partner enter a second marriage and issues regarding debt and insolvency.
This government has once again done nothing, but tried to present it as a wonderful step forward. I would be more concerned about my business withan increase in the nil rate band to a million, than this! I only fear that people will assume that they do not need to consider their options fully based on the reporting of Darling's speach and find their estate's wiped out through long term care costs or a misunderstanding of the rules on IHT going forward.
I have to say my heart has always been for a lower inheritance tax threshold.
There surely cannot be a better time to pay tax than when you're dead. And society requires some action to halt nepotism or we end up with less able people in positions of power and influence.
However, having said that, it is too difficult a tax to collect - you simply can't get the rich to pay up.
I would therefore propose getting rid of IHT altogether and replacing it with a land/property tax - you can't hide physical assets - and by taxing them you may be able to bring down their prices making them more affordable to the majority...a win win I think.
What concerns me is the big increase in indebtedness that this Government is presiding over - largely beyond most peoples understanding! Coupled with inefficient beaucratic procurement in the bloated state sector, this is a nasty combination. The continuing trend of increasing the tax burden will stiffle small business who are the biggest employer in the country. Another 3 years of this trend and we will be in a similar position to France - moribund and debt ridden. Lets have less and more efficient Government!