After the surprising majority win by the Conservatives, it is hoped that a calmer administration, with fewer surprises and less upheaval, will now follow. While there may be a shift in some of the policies proffered in their manifesto, the Conservatives will no longer need to contend with the inevitable bartering involved in a coalition government. We outline below what we expect to see, as well as the issues that should no longer be under the spotlight, during this new administration.
Although an absolute abolition of non-domicile status should no longer be on the cards, we can expect less dramatic change in this area in the shape of:
- a general review of the availability of non-domicile status (with particular emphasis on those non-domiciled individuals born in the UK);
- the potential for introduction of a minimum claim period for the remittance basis charge following the consultation on this issue earlier in the year; and
- possible further increases in the remittance basis charges applicable to non-domiciled individuals.
All talk of the dreaded mansion tax has been shelved – at least for the lifetime of this government – and the Conservatives have promised that direct taxes will not be increased. Therefore, the current rates for income tax, capital gains tax, VAT, NICs, stamp taxes and corporation tax should all be frozen. In addition, the income tax personal allowance will increase to £12,500 (with legislation being introduced to ensure that this allowances will automatically rise in line with the national minimum wage) and the threshold for the 40% higher rate income tax band will be raised to £50,000.
The Conservatives have long promised an increase in the nil rate band (NRB) and therefore we should expect that their pledge effectively to raise the combined NRB for married couples and civil partners to £1 million (by way of a new transferable main residence allowance of £175,000 each) will be an area legislated on sooner rather than later. However, such an increase in the NRB should prompt a review of existing testamentary arrangements to ensure that they will still achieve the desired result, particularly where a NRB trust or legacy is used.
We can also, finally, expect change on the tax treatment of trusts, following two consultations on the availability of NRBs to trusts established by an individual during their lifetime. Another area to watch will be the use of deed of variations to vary the terms of an individual’s will or intestacy after death – flagged as the subject for a consultation by George Osborne in his last Budget.
We therefore anticipate that there will be less of a dramatic shift in the tax landscape and more of a continuing move in the direction in which we have already been heading.