What does the 2014 Autumn Statement mean for private wealth in the UK?
Opinion 5 minute read

What does the 2014 Autumn Statement mean for private wealth in the UK?

09 December 2014

Following last week’s Autumn Statement – the last before the election next May - our UK Director of Private Clients says the UK Chancellor might be running out of ideas for new taxes for the wealthy.

UK Chancellor George Osborne was very much "returning to the same well" in his 3 December Autumn Statement as far as private clients are concerned - many of the changes announced built on new taxes or tax changes he himself has introduced over the past four years. The danger, as far as Mr Osborne’s tax rises are concerned, is that he may soon find the well starts to run dry!

Before going any further, I should raise a note of caution. The changes announced last week are either subject to consultation or will generally be subject to legislation in 2015, which may well not be passed before the general election in May and may be amended before Royal Assent.

Excepting the stamp duty changes, I detail the main changes affecting private clients below, taking the positive ones first.

Individual Savings Accounts (ISAs)

As well as raising the ISA limit to £15,240 per annum from 6 April 2015, Mr Osborne announced that spouses will from 3 December 2014 be allowed to pass their tax-free fund to their widow(er)s on their deaths and those widow(er)s will from 6 April 2015 inherit their deceased spouses’ tax-free annual allowance - that is, a widow(er) could invest £30,480 per annum. These reforms build on previous significant rises in the ISA limit and investment flexibility in previous budgets. 

Whilst these may sound generous, on the death of the second spouse their ISAs (unless invested in certain AIM listed shares) will be within the inheritance tax regime at a potential 40% tax rate so this may be a case of tax deferred rather than tax lost to the Chancellor.

Personal allowance and higher rate threshold

The autumn statement provides that the personal allowance (the amount of income that can be received free of tax) will be £10,600 for the year ended 5 April 2016 and not £10,500 as previously announced. The amount of income that can be received before paying the higher tax rates (40% or 32.5% for dividends) is also increasing to £42,385. Generally this threshold has been declining throughout this parliament so this is a change of course for the Chancellor.

Enterprise Investment Scheme

Capital gains are generally taxable at 28%, but certain gains (broadly sales of family businesses) qualify for entrepreneurs relief and are taxable at 10%. It is possible to defer a capital gain by investing in certain small businesses, but when the investment is sold, the deferred capital gain is taxable at 28%. The Chancellor is now allowing gains subject to entrepreneurs relief to be deferred and, when the re-investment is sold, the revived gain will only be taxed at 10%.  This is effective for re-investments after 3 December 2014.

Pension changes

The autumn statement included announcements that after 6 April 2015, for deaths under age 75, any pension pots can be passed on tax-free, whether the pension has been partially drawn or not and regardless of the beneficiary. Therefore, wealthy individuals may now decide against drawing pensions before 75, allowing them to roll-up tax-free. In addition, the remaining payments from any joint life guaranteed annuities will be tax-free; and for deaths after age 75, any lump sum taken by a beneficiary from an inherited pension pot will be taxed at 45% and any income withdrawals will be taxed at the beneficiaries’ marginal income tax rates. An individual could in this way leave a stream of income to fund his great-grandchildren’s school fees relatively tax free if desired.

Annual Tax on Enveloped Dwellings (ATED)

ATED is paid by companies and collective investment schemes which own UK residential property. It was originally introduced from 1 April 2013 on such properties valued at over £2 million to catch individuals who had used a corporate envelope to avoid stamp duty land tax.  Earlier this year, the Chancellor announced he was extending the tax to properties valued at over £1 million from 1 April 2015 (an annual charge of £7,000) and to those valued in excess of £500,000 from 1 April 2016 (a £3,500 annual charge). On 3 December, he announced that existing ATED rates will increase by inflation plus 50% from 1 April 2015. The table below gives the details.


Valuation Tax for 2015/16
£1 million - £2 million £7,000
£2 million - £5 million £23,350
£5 million - £10 million £54,450
£10 million - £20 million £109,050
More than £20 million £218,200



The remittance basis charge was originally introduced by the last Labour government, but George Osborne extended it in 2012. Broadly speaking, individuals not domiciled but resident in the UK have a choice of either paying tax on their foreign income and gains or paying the remittance basis charge (and losing their income tax personal allowance and capital gains tax annual exemption against their UK income and gains).


Years of residence Remittance basis charge now Remittance basis charge announced
Under 7 Nil Nil
7 - 12 £30,000 £30,000
More than 12 £50,000 £50,000
12 or more out of the last 14 N/A £60,000
17 or more out of the last 20 N/A £90,000

It is not entirely clear from which year the announced changes will take effect.


The Chancellor also announced a consultation on only allowing non-domiciles to elect for the remittance basis charge for a period of three years or more.  Currently, non-domiciles can make the decision each year and this allows them to make the election only in years in which they have substantial non-UK income or gains.

Read more about business and investment in the UK.

Written by

Vince Cheshire

Director of Private Client Services, UK

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