UK Chancellor Jeremy Hunt, delivering the Autumn Statement 2023 on 22 November, announced that the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) will be extended from 6 April 2025 to 6 April 2035.
Hunt said the government was committed to ensuring early-stage, innovative British companies have access to the investment they need to grow and develop. EIS and VCTs provide generous tax incentives to encourage private investment into those smaller, younger companies, as follows:
- Annual investment of up to £2 million per tax year in EIS attracts income tax relief of 30%, capital gains tax free growth and an inheritance tax exemption.
- Annual investment of up to £200,000 per tax year in VCTs attracts income tax relief of 30% and provides tax free dividends and capital gains tax free growth.
Charges under the Annual Tax on Enveloped Dwellings (ATED), which applies to companies and trusts that own UK residential property valued at more than £500,000, will be increased by 6.7% from 1 April 2024 in line with the September 2023 Consumer Price Index.
This will take the charge to £4,400 a year for a property valued between £500,001 to £1 million, and at the top end of the scale to £287,500 a year for a property valued over £20 million, an increase of over £18,000).
As announced in the Spring Budget, the lifetime allowance for pensions will be abolished from 6 April 2024. Legislation is to be included in the Autumn Finance Bill to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements and reporting requirements, as follows:
- The maximum pension commencement lump sum for those without protections will be kept at 25% of the fund up to a maximum of £268,275, which is 25% of the lifetime allowance of £1,073,100.
- The lifetime allowance excess lump sum will be replaced by a pension commencement excess lump sum, which will be taxed at an individual’s marginal rate of income tax.
- On death before age 75 beneficiary drawdown plans and beneficiary annuities will continue to be excluded from income tax.
- A new ‘overseas transfer allowance’ will be introduced for transfers to qualifying recognised overseas pension schemes (QROPS), which will be equal to the level of an individual’s lump sum and death benefit allowance of £1,073,100.
- Where the total value of an individual’s transfers from registered pension schemes to a QROPS exceeds their available allowance, the excess will be subject to the overseas transfer charge.
The government is launching a call for evidence on a ‘lifetime provider model’ to simplify the pensions market and allow individuals to move towards having one pension pot for life, which would allow individuals to have contributions paid into their existing pension scheme when they change employer. The government said this would provide greater clarity on retirement savings, encourage more active participation, and allow individuals to retain control over retirement provisions.
Also in the Autumn Finance Bill 2023 will be legislation to introduce harsher sanctions for those who promote tax avoidance scheme. This is to include:
- A new power which will mean HMRC can take action to get directors or companies associated with promoting tax avoidance disqualified.
- New criminal offences for those who persist in promoting tax avoidance schemes even after they have received a notice instructing them to stop
Please contact Sovereign to discuss your tax planning requirements.
