Finance (No. 2) Bill — House of Commons, 2016-04-11
Topic: Macroeconomics
David Michael Gauke (Conservative, Centre-right): I will discuss avoidance and evasion shortly, but on that specific proposal, we have strengthened HMRC’s capabilities in this area. The ability to name and shame facilitators of tax avoidance was introduced by this Government, and I think it is right that we have done that. As for the precise process, we think the balance is about right—it is difficult to see that there would be a substantial difference in terms of effectiveness if action were taken earlier. The whole idea of the regime was introduced by this Government As well as helping working households, the Government are committed to creating a nation of savers. In the Bill, we legislate to increase the personal savings allowance from April 2016, meaning that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will pay no tax on their savings income up to £500. As a result, 95% of taxpayers will pay no income tax on savings While supporting savers, we must also ensure that support is well targeted. The pension lifetime allowance is currently set at £1.25 million, but 96% of individuals now approaching retirement have a pension pot worth less than £1 million. We want a system that is targeted and sustainable and supports the majority of those approaching retirement. That is why the Bill reduces the pension lifetime allowance to £1 million—a change that will affect only the wealthiest pension savers The Bill also implements long overdue reform of the outdated and complex dividend tax system. The current system was designed at a time when total tax due on dividends was as high as 80% for some taxpayers; it also provides incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill. For those reasons, the Government are modernising and simplifying the dividend tax system by abolishing the dividends tax credit and replacing it with a new £5,000 tax-free allowance. The Bill also sets the dividend tax rates at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Some 95% of all taxpayers and more than three quarters of those receiving dividend income will either gain or be unaffected by the changes Supporting home ownership and first-time buyers is a key priority for the Government. Although people should be free to purchase a second home or invest in a buy-to-let property, that can affect other people’s ability to get on the property ladder. The Bill therefore implements higher rates of stamp duty land tax for the purchase of additional residential properties that are three percentage points above the standard rates I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties. I thank my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) for bringing that to my attention. I am happy to reassure the House that that is not our intention and the Government will table an amendment in Committee to correct the error and ensure fair treatment for annexes.