News Item
Less than one month before Tax hike.
The first Conservative / Liberal Democrat Budget will be on 22 June.
The date of the new Government’s emergency Budget has been announced for 22 June. It has been well trailed that this will an opportunity to raise necessary finances to partially deal with the UK’s record deficit. Whilst one does not know the exact measures that will be included in the Budget certain areas have been well flagged like the increase in Capital Gains Tax (“CGT”) rates. The popular press are already drawing attention to how unpopular the Budget is likely to be. The fact that we have just under a month before 22 June provides us with an opportunity to each review our tax affairs in order to try and mitigate wherever possible the expected increases in tax.
Expected Changes
- Capital Gains Tax (“CGT”) will rise possibly up to 50% from 18% and it is likely that these rates will be in place for the next 5 years at least. Major impact on net return after tax on share portfolios and sales of second homes. It also possible that the CGT annual exemption of £10,100 will be significantly reduced.
- There will be CGT relief for “entrepreneurs” but there is no guarantee that it will be tax at 10% for the first £2m of gains as it is at present.
- VAT rise to possibly 20%
- Cut in corporation tax rate from 28% to 25% funded by restrictions on targeted tax reliefs, i.e. Research & Development tax reliefs, abolition of 100% capital allowances, reduction of writing down allowance to possibly 10% per annum on a straight line basis. The government is committed to lower and simpler corporate tax rates with the aim of major reform of corporation tax over the next five years.
- On the international front the aim of reforming the Controlled Foreign Companies rules is to encourage international firms to come to the UK rather than leave it.
- 50% rate of income tax will remain but expect squeezing of personal reliefs so that they are available only at the basic rate, i.e. pension premium relief and possibly gift aid relief.
- In addition to the expected changes married couples should also be considered as there is likely to be a small additional personal allowance for being married. However, on the down side we may see the introduction of income shifting rules, which were considered by the last government, in light of the 50% top rate of income tax.
Whilst it is not known the date on which any changes will be effective from it is prudent to assume that they will be from 22 June.
Who will it impact?
- The changes are likely to impact all higher rate tax payers, companies, trusts and charities.
- Shareholders looking at succession and exit planning over the next few years.
What can you do?
- There are a number of strategies that can be adopted that will give some protection against the above. Because time is short we would urge you to contact us so that your tax position can be reviewed.
- Where you are a shareholder wishing to consider succession and exit planning, contact us to help with potential pre-budget structuring and exit planning post budget.