Last week Philip Hammond presented his first Autumn Statement to the House of Commons since he replaced George Osborne as Chancellor of the Exchequer following the now infamous Brexit resignations.
As always, there was much speculation leading up to the delivery of the Autumn Statement. Would the new Chancellor try and make his own mark straight away by withdrawing the promises of his predecessor and creating bold new ones of his own? Journalists were predicting every scenario from one extreme to the other, and everything in between.
So what was the outcome?
There were a number of big announcements in a variety of areas including housing and fuel duty, but from a Private Client point of view, no major changes to report.
This does however mean that most significant part to note was the lack of any new announcement regarding the Main Residence Nil-Rate Band. This new tax relief was promised by George Osborne and will now come into force as planned at its introductory rate of £100,000 from April 2017. Some commentators had suggested that this might be withdrawn or simplified by Philip Hammond but he has opted to progress as planned.
Earlier in the year I commented on the level of Inheritance Tax that the government received during the last tax year. As the new Main Residence Nil-Rate Band is restricted to estates worth just over £2 million and only available when your family home is passing to direct descendants, it is unsurprising that the Chancellor has chosen not to simplify this new tax relief. If the new Chancellor had replaced the planned Main Residence Nil-Rate Band with a flat rate rise in the standard Nil Rate Band from £325,000 to £500,000, this would have made matters much simpler for everyone. However, it would also have drastically reduced the government’s Inheritance Tax income which has been rising rapidly for the past decade. Although the past few governments have not been overly aggressive on pursuing Inheritance Tax, they have not made much effort to minimise it through increasing the Nil-Rate Band. The income Inheritance Tax generates is a welcome addition to the public purse every year, even if a government will not openly admit it.
The new Main Residence Nil-Rate Band will be a welcome tax relief to many families and by April 2020 will provide spouses with a combined £1 million of tax free relief on death. However, there are strict criteria to fulfil before an estate can qualify to use this new exemption and how some of the more technical elements of the relief will operate in practise remains to be seen.
If you wish to discuss the cost of care and planning for the future, please contact Chris Gardiner on 03330 430150.
