Whilst there were very few surprises in relation to tax, the requirement for a response to Covid-19 could not have been anticipated, as it was not something any of us could have predicted a few months ago. The Chancellor also announced substantial infrastructure spending in line with his party's manifesto commitments.
In relation to tax, there was confirmation of substantive changes which will impact those successful business owners who had planned to utilise their Entrepreneurs Relief (the relief which reduces CGT to 10% for qualifying gains) lifetime limit of £10 million as part of their tax planning going forward. The limit has been reduced to £1 million of qualifying gains as of 11 March. The swift introduction of the change means that planning to utilise this relief at the higher previous level is removed and those individuals who had intended to, will now need to reconsider their options. Plenty of opportunities are still available for individuals to plan and we expect to see family businesses in particular, consider their succession strategy in light of this change.
There was negative news for non-UK resident property investors looking to purchase UK property, as an additional 2% SDLT surcharge will be introduced from April 2021. We are though pleased to see that there will be a grace period before introduction. This will now need to be considered when assessing which acquisition structure is best suited for future investment.
The main tax headlines are as below:
Entrepreneurs' Relief for Capital Gains Tax (CGT)
- Despite the rumours, Entrepreneurs' Relief will not be abolished completely, however the lifetime limit will be reduced from £10 million, to £1 million. This measure is effective from yesterday (11 March 2020). This is likely to adversely affect individuals seeking to dispose of their personal trading businesses – only the first £1 million of qualifying gains will now be eligible for the reduced (10%) CGT rate.
Business Relief for Inheritance Tax (IHT)
- There was no mention of reform to Business Relief (sometimes referred to as Business Property Relief, (BPR)), or a major overhaul of the IHT regime more generally, despite comments in the media and the recent recommendations from the All-Party Parliamentary Group (APPG) on Inheritance and Intergenerational Fairness.
Stamp Duty Land Tax (SDLT)
- Overseas buyers of residential property in England will suffer a 2% SDLT surcharge. This measure will be introduced from 1 April 2021. This is lower than the 3% surcharge previously suggested and will not have an immediate effect (unlike a number of SDLT announcements in recent years).
- There was no mention of reducing SDLT rates more generally.
Income Tax Relief for Pension Contributions
- Adjustments to the pension tapered annual allowance rules were announced, (where the pension annual allowance tapers down from £40,000), these changes broadly favour taxpayers (particularly those earning between £110,000 and £200,000). The new 'threshold income' level will be £200,000 (rather than £110,000).
- There will be no removal of the 40% and 45% income tax relief for pension contributions made by higher / additional rate taxpayers, despite the reports in the media.
- Corporation tax will remain at 19%. Previous plans to decrease the rate to 17% have been shelved.
Tax Avoidance, Evasion and Non-Compliance
- Extra funding will be provided to enable HMRC to tackle tax evasion and tax avoidance, with an emphasis on the 'hidden economy'.
- The Government will also invest in additional compliance officers and new technology for HMRC, to enable them to 'reduce the tax gap' and expand their debt collection capabilities.
Top Slicing Relief
- For those with life insurance policies / offshore bonds, or similar, there will be a change in the way 'top slicing relief' for chargeable event gains is calculated.
National Insurance Threshold
- The national insurance threshold was increased from £8,632 to £9,500.