A summary of key legal updates for the Private Client industry over the past week is as follows.
Tax policy – Autumn Statement speculation
The Autumn Statement will take place next Thursday 17 November and rumours are circulating on what tax rises will be announced by the Chancellor to help the government recoup the £50billion needed for Britain's public finances. Whilst nothing has yet been confirmed by the government, current speculation includes the following.
- Capital gains tax ("CGT") – an increase in the headline rates of CGT (the main rates are currently 10% and 20%) as well as changes to CGT reliefs and allowances.
- Inheritance tax ("IHT") - extending the freeze on IHT thresholds for another two years. The IHT nil-rate band is currently frozen at £325,000 until 6 April 2026.
- Income tax – raising the 45% top rate or lowering the £150,000 annual income threshold at which the top rate starts to apply.
- Income tax – an increase in the dividend tax rates and a cut to the £2,000 tax-free dividend allowance.
- Pensions - freezing the pension lifetime allowance for two further years, with a rise in line with prices delayed from 2026 to 2028. The standard lifetime allowance is currently £1,073,100.
In terms of CGT, the government is already in possession of two reports on the reform of CGT after the two Office of Tax Simplification consultations issued in 2020. The government has responded to parts of the reports and taken forward some of the more practical and administrative recommendations, but so far not the parts relating to the rates of tax. With the OTS recommendations and industry feedback already gathered, implementing changes to CGT would arguably be quicker and easier to do than changes to other taxes. Jeremy Hunt set to launch capital gains tax raid (telegraph.co.uk)
Contentious trusts and estates – cohabitation law reform
On 1 November, the government announced it would not consider reforming laws relating to cohabiting couples in the context of financial remedy and succession until existing work on the law of marriage and divorce has concluded. This is despite calls for reform from MPs and professional bodies. In particular, the government rejected immediate reforms concerning intestacy and family provision claims for cohabitants. At present, a cohabiting partner has no right to a share of their deceased partner's estate under the intestacy rules; whilst under the Inheritance (Provision for Family and Dependants) Act 1975, a cohabiting partner can make a family provision claim if they have been living in the same household as their deceased partner and on the same basis as a spouse or civil partner for two-years prior to death. Calls for reform had also been made in respect of IHT with the proposal that the tax should apply to cohabitants in the same way as it does for spouses and civil partners, but these proposals were also rejected. The government accepted, however, that there should be clearer guidelines on how pension schemes should treat surviving cohabitants. Government rejects requests for cohabitation law reform in England and Wales | STEP; Government rules out cohabitation reform | News | Law Gazette
Mental capacity – LPA registration waiting periods
A service status update from the Office of the Public Guardian ("OPG") on 1 November has advised that registration delays for Lasting Powers of Attorney in England and Wales are up to 20 weeks. The OPG have advised that: "given the delays we are experiencing, you may want to use some short-term options for health, welfare and financial decisions". Some of the "short-term options" it suggests are the use of a general power of attorney (which does not require registration but will not endure after the donor's loss of mental capacity), making an advance statement, or making an advance decision. About our services - Office of the Public Guardian - GOV.UK (www.gov.uk)
Probate – grant of probate waiting times
According to latest data from the Ministry of Justice for the period from January to March 2022, the average waiting time for a grant of probate was eight weeks overall, and the average for letters of administration was fifteen weeks (with a Will) and twelve weeks (without a Will). If a probate application has been "stopped" for any reason, the application took 15 weeks on average to be issued; but the average reduced to 5 weeks where there were no "stops". Family Court Statistics Quarterly: January to March 2022 - GOV.UK (www.gov.uk)
Wills – EU Succession Regulation and Germany
The German Federal Court of Justice has given a ruling in a cross-border succession case involving the EU Succession Regulation ("the Regulation"). The court ruled that the testator's choice of foreign law under the Regulation should be overridden in favour of German forced-heirship law. The court cited German public policy as justification as the elected foreign law did not entitle the descendants to the fixed compulsory share they would have received under the German forced-heirship provisions. There was a strong German connection in this case and it remains to be seen whether the same decision would be made if the testator was not so well connected with Germany. Compulsory share and foreign inheritance law | PE-Magazin