Budget 2015: the private client perspective

George Osborne’s last hurrah as chancellor of a coalition government was hotly anticipated and there has been much speculation about likely giveaways, bombshells and all manner of surprises in the weeks leading up to it.

I am sorry to say it disappointed on all those fronts, which is not to say it was a bad Budget. It was a highly political Budget, with little in the way of detailed substantive announcements – and what more could and should we have expected? We all know the real story will be in a post-election Budget, whoever wins. No doubt the chancellor was seeking to indicate some of what he might do if given a clear mandate at the general election, but at this stage hint is all he can really do.

Against that backdrop, what were the announcements of note for private clients?

Act now: As ever, fairness is a hot topic, which appears to translate into further focus on anti-avoidance measures and harsher disclosure facilities. In terms of immediate actions, the Liechtenstein and Crown Dependencies disclosure facilities will close early: in December 2015, instead of April 2016. They will be replaced by a harsher facility on less generous terms, with no guarantees of immunity in some cases; tax of at least 30% of the undeclared amount will be charged, as well as penalties and interest. This really does seem to be a last call for those wishing to come forward under the existing facilities while still possible.

Anti-avoidance: Onshore, the deterrent effect of the GAAR is to be strengthened through the introduction of penalties for planning which is found to be in breach of the GAAR. At the moment, it is rather hard to assess the impact of the GAAR, as it has not been visibly deployed since it came into force in July 2013. That said, it does have a deterrent effect and these new measures will surely add to that.

The disclosure of tax avoidance schemes (DOTAS) rules have also been further enhanced. New measures in these rules, announced on Budget day, include protection for those wishing to notify HMRC of non-compliance; and a requirement for employees to notify employers of participation in schemes around employment income. Additionally, there will be measures to assist HMRC in detecting schemes which it has not been notified about.

Pensioners: Those with significant pensions will not be pleased by the reduction of the lifetime allowance from £1.25m to £1m with effect from 6 April 2016, although a slight softening to the blow is that this will be index linked from 2018. On the upside, those who are already receiving annuities can receive a lump sum in exchange for assigning the income to a third party. Details of how precisely this will be put into practice are awaited.

Savers: As of this autumn, savers with ISAs should be able to replace cash withdrawn from an ISA without that counting towards their annual limit.

Also, one assumes, to incentivise further saving, a new personal savings allowance covering bank and building society interest is to be introduced from 6 April next year. The allowance will be £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and zero for additional rate taxpayers. The requirement for banks to apply an automatic 20% deduction will also cease from April 2016.

Filing to be made easier: The chancellor was clearly delighted to announce the end of self-assessment in the Budget. The push to make compliance simpler, with the introduction of online accounts to be fully rolled out for individuals and small businesses by 2020, is welcome.
Of course, the real message is to wait and see what happens in the early summer and the Budget that will be expected to follow the election.