The Chancellor delivered his third Budget on Monday and no doubt you have read or been sent a number of commentaries since then; as before we have therefore tried to pick out those points that we feel are of most relevance to our clients.
As usual, speculation was rife before the Budget, given that this was Mr Hammond’s last before the details of the final Brexit deal are released. In the end, there were very few surprises or significant announcements, with subsequent headlines mainly focussing on income tax and potholes. The Chancellor also left the door open for a Spring Budget in the event of a ‘no deal’ Brexit.
Income Tax
The Personal Allowance will increase to £12,500 and the Higher Rate Threshold will increase to £50,000 from April 2019 – a year earlier than planned. The allowances will remain the same for 2020/21 and then increase in line with the Consumer Price Index (CPI).
For income from £100,000 to £125,000 the personal allowance is gradually lost giving rise to a very high marginal rate of tax for income that falls in this band. With some planning, for example making pension contributions, this can often be mitigated. Please let us know if you would like to discuss this in more detail.
Capital Gains Tax – payment window
As previously announced, from April 2020 UK residents will be required to pay any CGT due on the disposal of a UK residential property within 30 days of the date of completion.
Capital Gains Tax (CGT) – Private Residence Relief
Currently, where a taxpayer lets out a property that is, or has in the past, been their main residence, they are able to claim lettings relief on a final sale so that up to £40,000 of any gain is exempt from CGT. From April 2020, this will change so that it only applies in circumstances where the owner of the property is in shared occupancy with a tenant. The final period exemption will also be reduced from 18 months to nine months, which – given the current state of the property market – could bring the sale of some family homes into CGT. There will be no changes to the 36 months that are available to disabled persons or those in a care home.
Pensions
Despite the usual speculation about the removal of higher rate tax relief, there were no changes to pension legislation. The Lifetime Allowance will rise in line with inflation as planned, to £1,055,000 from 6th April 2019.
Enterprise Investment Schemes (EIS)
Following a consultation earlier this year, a new EIS fund structure will be introduced from April 2020, which will target knowledge-intensive companies. The time period over which approved funds must make their investments will be extended from one year to two, with at least 50% being invested in the first year. A carry-back rule will be introduced so that investors can set their relief against income tax liabilities in the year before the fund closes.
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If there are any matters you would like to discuss in relation to the Budget or any aspect of your financial planning then please do not hesitate to get in touch.