UK finance minister announced a series of measures in the first all-Conservative budget package since 1996. Wealth managers set out their preliminary thoughts.

Today’s budget statement by UK finance minister, or Chancellor of the Exchequer, George Osborne, hiked the “nil-rate” band on inheritance tax payments to £1 million ($1.54 million), removed the notion of being a permanent non-domiciled resident and hiked the threshold on the 40 per cent income tax rate. The minister also announced measures to tighten rules on certain practices, such as “base shifting” in areas of private equity. 

This is the first budget by a Conservative-run government since 1996 (for the past five years, Osborne’s Conservative allies were in a coalition with the centrist Liberal Democrat Party.) 

Here is a collection of reactions from wealth managers and private client advisors to the measures. This item will be updated as more reactions come in. (To see the main story, click here.)

Camilla Wallace, partner at London law firm Wedlake Bell
"The mere threat of the removal of non-dom status before the election saw one of our London non-dom clients leave the UK for Switzerland and several others started to think about where they would relocate to if the outcome of the election was unfavourable. With these changes we can expect to see others follow suit.

"Non-doms are already familiar with the concept of effectively losing their non-dom status for Inheritance Tax purposes after 17 years in the UK.  This measures essentially extends that treatment to Capital Gains Tax and Income Tax and comes as no surprise."

Liam Bailey, global head of research at Knight Frank
On their own, the changes to the non-dom tax rules will not have a profound impact on the prime London market as demand is driven by a number of factors, and non-doms form only a part of demand.
These reforms follow a series of changes in recent years that make it increasingly difficult to argue prime residential property is under-taxed. The relatively subdued nature of the prime London market since December’s stamp duty changes highlights the risk of higher taxation on market demand and also Government revenues.

Nimesh Shah, partner, Blick Rothenberg, a firm of chartered accountants
Major changes announced to the non-domicile rules effectively mean that non-doms are taxed on their overseas income and capital gains after 15 years.  This isn't aligned with the current rules on inheritance tax where a non-dom is brought into UK IHT after 17 years.  It would make sense to align all three taxes but this wasn't mentioned by the Chancellor.

Andy Zanelli, head of retirement planning, AXA Wealth
 
Plans announced in today’s Budget to introduce an addition to the inheritance tax (IHT) threshold for property to £1 million certainly make things interesting. Any increase in the IHT allowance to allow for the sharp rises in house prices in the last decade was always going to be a popular move as it would effectively take aspirational households out of the reaches of a tax that was never intended to catch them. The new additional threshold leaves us with an uneven playing field and an interesting financial planning dilemma. Those people looking at estate planning now need to consider whether to downsize their home and potentially invest money elsewhere or leave their money tied up in property, knowing they can pass it on to their children free of IHT. The consequence of this move means assets within an estate are treated differently: my wife and I can leave a £1 million property to our children without them incurring an IHT charge, however should we choose to downsize and perhaps invest some of that money, anything above the current nil rate band of £325,000 would incur a 40 per cent tax charge. Added to this, today’s move is likely to help very few families. Figures verified by the Office of Budget Responsibility suggest that less than 10%* of the estates that will be subject to IHT in 2015/2016 will be taken out of the IHT net. Is this an announcement that seems better than it will actually be in practice?

Genevieve Moore, partner at Blick Rothenberg
The Chancellor indicates that tax “planning” will be targeted and generate savings for this Government not just tax evasion or avoidance under the microscope now.  

Stella Amiss, international tax partner at PricewaterhouseCoopers 

This is a bold and surprise move [on corporation tax reduction].Business weren't calling for a further rate reduction, and it's expensive -  £6.6 billion over five years. But it sends a clear signal that the Government is pro tax competition and this message may be helpful in attracting overseas business to UK shores. The anti-avoidance measures for corporates were relatively piecemeal. Tinkering around the edges rather than making a big difference. 

Frank Nash, Blick Rothenberg
The Chancellor must justify how he has arrived at the £1.5 billion extra tax revenue by abolishing permanent Non-Dom status, which has so far encouraged substantial investment in the UK.

Andrew Sneddon, partner and head of tax at Trowers & Hamlins  
It is not surprising that the government is targeting non-domiciled taxation rules, but there is concern that the abolition of permanent non-domiciled status for long-term residents risks an exodus of wealthy individuals prior to reaching 15 years residency. Such individuals will need to review their position before April 2017.

Institute of Economic Affairs
This Budget was a missed opportunity to bring down the 45p rate of income tax. When the rate was cut from 60 per cent to 40 per cent in 1988, tax revenues soared because it created the incentive to work and invest in Britain. Changes to the 40p threshold also look feeble, increasing more slowly than wage growth. Politicians should raise this threshold annually by the higher of wage growth or inflation to begin to compensate for years of under-indexing. The announced reforms to inheritance tax may be headline-grabbing, but are poorly thought through. Aside from adding additional complexity, the changes may well lead to a raft of unintended consequences by encouraging some cash-rich pensioners to upsize if they have the resources to buy a property for £1 million, further distorting our already dysfunctional housing market.