The Business Exchange Bath & Somerset Issue 15: Spring 2020 | Page 15

Get ready for a range of tax changes this April Says, Dan Kenyon, General Practice Manager at Milsted Langdon Monday 6th April 2020 will see a range of tax changes come into effect with the start of the 2020/21 tax year. Some of these changes could have considerable implications for your tax bill, depending upon your specific circumstances. Here are some of the most significant changes: CAPITAL GAINS TAX (CGT) Some of the biggest changes in April relate to CGT, with extensive changes to Private Residence Relief and Lettings Relief set to come into effect. While current and former landlords will be most affected by the changes, people who choose to stagger the buying and selling process so that they only sell up after buying their new home could be at increased risk of incurring a tax bill that they would not previously have received. Until now, homeowners had 18 months in order to complete the sale before CGT applies, however, restrictions to Private Residence Relief will see this slashed to just nine months from April, meaning conveyancing and finance delays could become very expensive. Furthermore, from April, Lettings Relief (which discounts from the CGT calculation by up to £40,000 any time during which a landlord used a property as their main residence) will be restricted to circumstances where the landlord lived at the property with their tenant. Compounding the potential additional tax bills that arise from the changes is a new requirement for CGT on residential property to be calculated and paid within 30 days of the completion of the sale, rather than being included at least 10 months later on an individual’s Self-Assessment Tax Return. Taxable gains from a sale will need to be reported via a standalone online return but will still need to be included in a person’s subsequent Self-Assessment Tax Return for the year. NATIONAL INSURANCE CONTRIBUTIONS (NICS) The NICs threshold is set to rise by more than 10 per cent to £9,500 a year, for both the employed and self-employed. The average employee is expected to pay around £104 less as a consequence in 2020/21. INCOME TAX The key change in relation to Income Tax is that there will not be a change to the thresholds, unless the Chancellor changes course at the upcoming Budget. This means that the personal allowance and the basic rate limit will not change for the first time in several years. IR35 HM Revenue & Customs (HMRC) has announced that the changes to the off-payroll working rules – known as IR35 – in the private sector will not apply to work undertaken before 6th April 2020. HMRC had said previously that the new rules, which transfer the responsibility for determining an individual’s tax status from contractors to employers, would apply to all payments made from 6th April 2020, irrespective of when the work was carried out. Given the complexity of the arrangements and this late change, it is critical that employers and contractors are ready for the new rules as soon as possible. We thoroughly recommend that all taxpayers review their finances before the end of the tax year on 5th April to ensure that they are not missing out on any reliefs. However, it is just as important that they consider the impact of any new changes introduced in the new tax year. As the next tax year includes several amendments to legislation it is important that you speak to a professional to see how you will be affected. ENTREPRENEURS’ RELIEF Speculation is increasing that there will be an announcement on significant curbs to Entrepreneurs’ Relief in the next Budget, which could even scrap the valuable tax relief altogether. Entrepreneurs’ Relief allows business owners to pay half the usual 20 per cent rate of Capital Dan Kenyon Gains Tax on gains of as much as £10 million when they dispose of all or part of a business. The speculation comes after the Conservatives committed to reforming Entrepreneurs’ Relief in their December 2019 General Election Manifesto to try and refocus the relief away from the wealthiest to more typical entrepreneurs. The reforms introduced last year have already increased the holding period for qualifying shares from one year to two years. Revisions have also been made to the minimum five per cent shareholding requirements to include a five per cent economic interest test. New reforms could include changes to the holding requirement, or to the 10 per cent relief rate itself, while a lower limit on the lifetime relief, which has stood at £10 million since 2011, may be introduced. It is also possible that the Government may simply announce a review or consultation in the first instance, but as there was a commitment to reform the relief in the Conservative manifesto, business owners must consider the impact on their plans for a future sale of their business. For more information on tax planning or to discuss your options for a tax-efficient sale, contact the team at Milsted Langdon on 01225 904940 / [email protected] [email protected] 01225 904940 THE BUSINESS EXCHANGE 2020 15