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fru-gal

Autumn Statement 2015 Predictions

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Free houses for all.

You might be closer to the truth than you realise. Apparently (according to the Times this weekend) IDS is working on a scheme to gift 70% equity to all council house tenants thereby 'slashing housing benefit'.

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More gifted wealth redistribution. Taxpayer pays = free money. More extravagance.

Why 70%, isn't 10% plus say a loan enough. Debt is good enough for students so why not council tenants.

So gifting 70% of private housing equity to private tenants would also slash housing benefit. Just add the cost to the national debt that never gets paid back - it would probably boost GDP as well.

Edited by billybong

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You might be closer to the truth than you realise. Apparently (according to the Times this weekend) IDS is working on a scheme to gift 70% equity to all council house tenants thereby 'slashing housing benefit'.

Until the houses are sold to private sector landlords* who charge market rates / LHA rates, at which time HB goes back up again.

*Although if you sell in the first year, you have to pay back all the discount, then 80% in the 2nd year, and so on to 20% in the 5th year. And if you want to sell in the first ten years, you have to offer it to a local social landlord first, but they only have 8 weeks to find the money to buy it, so in many cases you'll be fine.

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So a 70% discount on a council house near Cambridge would leave me around £75,000 left to pay...

I`m sort of interested,

If the rumours are true you'd pay rent on the remaining 30% with no requirement to buy it at any point. If true it's quite a windfall for council tenants - a lot of equity to sell, or a much reduced rent bill.

Seems a tad unfair to the rest of us, not that the government is particularly concerned about fairness.

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Some interesting predictions from AccountingWeb:

...As a result of the Lords’ action George Osborne must now find an additional £4.4bn of expenditure cuts from other sources, or reign-in his target of a £10bn surplus in 2019/20 by borrowing more and perhaps phasing-in the tax credits cuts over five years. A third option is to raise taxes or duties, but the pesky tax lock (Finance Bill 2015-16 cl 1& 2) has limited his action in that direction.

So what can he do to raise funds? Three taxes which are not covered by the tax lock are CGT, IHT and SDLT, all of which are stuffed with reliefs and exemptions ripe for culling.

CGT

Entrepreneurs’ relief received some significantly body-blows in last year’s Autumn Statement on 3 December 2014, and in the Budget on 18 March 2015. I suspect the Chancellor has more attacks planned for this year, such as a removal of the relief when:

  • transferring shares to family members to trigger a material disposal; or

  • incorporating a property letting businesses.

Another very generous CGT relief is the exemption for gains made on shares taken by employees in return for giving up a bunch of employment rights (employee shareholder shares). The first £2,000 worth of shares are free of tax and NI on acquisition, but up to £50,000 of shares (measured on acquisition value), are also free from CGT on disposal – whatever the size of the gain. That is a glorious relief for private equity investors, as explained in Jolyon Maugham’s blog, and is ripe for reform.

IHT

Business property relief (BPR) and agricultural property relief (APR) provide 100% exemption from IHT when passing on a business or farmland. There have been rumours for years that BPR may be cut from the current 100% rate, or restricted in scope.

The value of quality English farmland has doubled over the last five years, and the price of farmland in other parts of the UK is similarly buoyant, which encourages investors. To have such a valuable asset protected from IHT by 100% APR, and be subject to 10% CGT under ER (in many circumstances) may be too tempting for George. Expect some tweaking, if not a wholesale reduction of IHT and CGT reliefs in that area.

SDLT

Commercial property values have not increased in line with residential property, but the number of non-residential property transactions is steadily increasing, according to the latest quarterly HMRC report. When SDLT was reformed in December 2014 only residential properties were affected. Now there are two different methods of calculating SDLT for residential and non-residential property transactions, and two methods of calculating the commercial land tax charges north and south of the Scottish border. This confused picture is ripe for “simplification”, which may well subtly increase the yields.

Currently there is a relief from SDLT where a family partnership incorporates, and that too could be vulnerable to be closed as a “loop-hole”.

Tweaking IR35

The government appears determined to deter tax-incentivised incorporation. The dividend tax is one line of attack, another is the restriction of travel and subsistence expenses for contractors working through intermediaries. Both changes are due to take effect from 6 April 2016. On top of those there is a rumour of further tweaking of the IR35 rules to force contractors on to their engager’s payroll where the engagement lasts for a set period – possibly as little as 12 months.

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CGT

Entrepreneurs’ relief received some significantly body-blows in last year’s Autumn Statement on 3 December 2014, and in the Budget on 18 March 2015. I suspect the Chancellor has more attacks planned for this year, such as a removal of the relief when:

  • transferring shares to family members to trigger a material disposal; or

  • incorporating a property letting businesses.

If he pulls this one we might have to get the Samaritans over to P118.

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I wouldn't be surprised also if he announced plans for his Pension ISA (ie pension contributions being made from taxed income into an ISA but protected from tax when spent at retirement). The prize of bringing forward a generation's worth of tax rebates will be just to juicy for him.

Plus hopefully a further tightening of the screw on the BTL business model.

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"People are living longer, so we see no reason why aspirational home owners should have limitations on the length of their mortgage terms. People are going to be allowed to pay mortgages until the day they die"

(Cheers and clapping in the house and from some people watching TV who are buyers on the Help to Buy Bail Banks scheme)

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More BTL squeezing, the last lot was not clearly enough laid out for the majority. will be a main point this time around. crystal clear.

Lots of tax grabs and closing loop-holes.

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So a 70% discount on a council house near Cambridge would leave me around £75,000 left to pay...

I`m sort of interested,

^Wrong quote. Meant the dailymail article and IDS idea of giving council tenants a 70% share.

A crazy idea.

It is unfair to non-council property tenants, and will cause great problems in the future when the councils try to re-home homeless/vulnerable – cheap council housing won't be available and they'll have to rely on expensive private accommodation. It would also make people liable for 70% of the maintenance costs; as a significant proportion of council tenants are low income that would cause severe hardship.

This Governments MO: Spread news articles slagging off the group they intend on targeting in the next budget. There have been a number of articles in the newspapers complaining about the gap between pensioners and working people. I wouldn't be surprised if pensioners are hit.

Edited by Bora Horza

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I wouldn't be surprised also if he announced plans for his Pension ISA (ie pension contributions being made from taxed income into an ISA but protected from tax when spent at retirement). The prize of bringing forward a generation's worth of tax rebates will be just to juicy for him.

Plus hopefully a further tightening of the screw on the BTL business model.

I'm sure he'll do something to tinker with pensions (ie make them less attractive for anyone grafting up and trying to take responsibility for their actions). To soon to have finished the consultation around the 'tax relief' or tax deferral as I like to think of it so wonder what else he'll come up with.

Anyway I'm making hay while the sun shines. Should just about manage £40k into the pension this year. Gives me flexibility for whatever the next tinker is.

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