With the new Government’s first UK Budget coming in March, Julian Smith, Head of Tax, explores what is likely to be featured, together with a round-up of the changes already scheduled for April 2020.
With a sketchy Conservative manifesto when it came to detail, it will be interesting to see what next month’s UK Budget offers. It’s likely that Boris Johnson will want to focus on domestic policy and introduce some of the tax cuts which he promised but at the same time spending will need to be considered too . Until then there are some things we do know, and some which are still up for speculation.
Capital Gains Tax
A review of Capital Gains Tax (CGT) and in particular Entrepreneur’s Relief is on the cards. This valuable relief for business owners could be at least reformed and – as a worst case scenario – abolished. CGT rates are currently at historic lows and may be increased. As CGT is perceived as a tax on the wealthy, such increases may go down well with those Labour voters who backed Boris at the last election.
For UK property, we already know of a tightening of the CGT rules coming in April for those selling UK residential property, including a significant shortening of the deadline for reporting and paying tax on gains on property sales to 30 days.
The Chancellor may cut the rates of Stamp Duty Land Tax to help boost the housing market particularly at the lower-end to encourage first-time buyers.
The Office of Tax Simplification (OTS) have reported that the UK’s Inheritance Tax system is far too complex and outdated. Therefore, the Chancellor may choose to increase the nil rate band but collect more tax in the long-term by removing or restricting some of the complex reliefs such as the main residence nil rate band, exemption for gifts out of income, business property relief qualifying rules and so on.
Income Tax and National Insurance
The tax rules for workers who are involved in the so-called ‘gig economy’ may be subject to change. There have already been changes for those working through personal service companies, clarifying whether such workers are actually regarded as employees rather than self-employed. With effect from April 2020, these changes will be extended to private sector organisations.
The starting threshold for National Insurance contributions will be raised from £8,632 to £9,500 (perhaps even higher) and the substantial increase in the minimum wage will boost consumer spending.
The proposed cut in the rate of Corporation Tax has been parked leaving the rate at 19% for 2020/21.
Short-term cuts to business rates have been promised to help smaller businesses.
The £50bn a year of pensions tax relief might be cut back to release funds for social care. The Chancellor may introduce a flat rate (rather than the individual’s marginal tax rate) and this would save a huge amount and look a lot fairer to the new Conservative voters.
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