Another tax relief that may be further restricted or even abolished is Capital Gains Tax entrepreneurs’ relief. This relief allows business owners to pay just 10% Capital Gains Tax on the first £10 million of capital gains when they dispose of their business and was tightened up in the Autumn 2018 Budget.
We are expecting major changes to inheritance tax in the March Budget following two reviews by the Office of Tax Simplification (OTS) and also a report by an All Party Parliamentary Committee. Inheritance tax is perceived as a complicated tax with numerous fairly trivial reliefs and exemptions. Currently the tax only generally applies to transfers on death and gifts within 7 years of death.
For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer. Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused.
Your maximum annual investment in ISAs for 2019/20 is £20,000. Your investment needs to be made before 6 April 2020. In addition, have you thought about investing for your children or grandchildren by setting up a Junior ISA? In the 2019/20 tax year, you can invest £4,368 into a Junior ISA for any child under 18.
If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme? These investments in certain qualifying companies allow you to set off 30% of the amount invested against your tax bill as well as the ability to defer capital gains tax until the shares are sold.
Your business year-end, not 5 April, is relevant for capital allowances purposes. If however you are running a business and making up accounts to 31 March or 5 April you should consider buying plant and machinery to take advantage of the £1 million Annual Investment Allowance.
It will be nearly 18 months since the last Budget and in the meantime we will have had three different chancellors following the unexpected resignation of Sajid Javid. The early years of a new Parliament are a good time to make radical changes and many are predicting significant tax announcements on 11 March, 2020.
If the draft legislation issued for consultation last year is enacted in the next Finance Act there will be important changes to private residence relief for disposals after 5 April 2020. Firstly, the exemption for the final period of ownership will be reduced from 18 months to 9 months.
Another announcement to listen out for in the Spring Budget on March 11 is whether the Chancellor acts on the recommendations of the Office of Tax Simplification (OTS) regarding inheritance tax. As reported in an earlier newsletter, the OTS suggested simplifying inheritance tax on lifetime gifts including reducing the period of potential exemption from 7 to 5 years.
From 6 April 2020 there is a major change in the reporting and payment of Capital Gains Tax on residential property disposals. From that date, it will be necessary to report the disposal of the property within 30 days of completion of the disposal and pay Capital Gains Tax on account to HMRC.
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