Tax News

Not All Shares Qualify for CGT Entrepreneurs' Relief Now

As the result of changes announced in the Autumn Budget, and now incorporated into the latest Finance Bill, not all ordinary shares necessarily qualify for the 10% CGT entrepreneurs’ relief rate on disposal.

As mentioned in last month’s Budget newsletter the definition of a personal company was tightened up so that from 29 October the shareholder must have entitlement to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.

Collecting Unpaid Tax for 2017/18 Through Your PAYE Coding

Under certain circumstances, it is possible to arrange the collection of unpaid tax through your PAYE coding rather than making a balancing payment on 31 January.

Gifts to Charity

Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment. 

For example, where an individual makes a £20 cash donation to a charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing their net cost to £15.

Christmas is the Time for Giving

Those thinking about making gifts at Christmas should take advantage of the various inheritance tax (IHT) exemptions and reliefs available to them. Note that certain gifts can also have capital gains tax (CGT) implications.

The IHT Annual Exemption - Use it or lose it!

What is Making Tax Digital?

Making Tax Digital (MTD) is the latest change to the method by which businesses must keep and administer their accounting records.

Initially MTD for VAT will require VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.

Personal Allowance and Higher Rate Limit Increased Early

The Government’s manifesto pledge back in 2015 was that the personal allowance would rise to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, the Chancellor has decided to bring forward these increases one year early from 2019/20, taking an estimated 1 million taxpayers out of higher rate tax.

Annual Investment Allowance Increased to £1 Million

The Annual Investment Allowance (AIA) which provides businesses with a 100% write off against profits when they acquire plant and machinery has been temporarily increased from £200,000 to £1 million for two years from 1 January 2019. This will again mean that the timing of expenditure will be critical. It may be advantageous to delay expenditure until after 1 January 2019 to get the full benefit in certain circumstances.

Capital Gains Tax Entrepreneurs' Relief Changes

The Chancellor has announced that the minimum qualifying period for Capital Gains Tax entrepreneurs’ relief will be increased from 12 months to 24 months for disposals on or after 6 April 2019.

IR35 "Off-Payroll" Rules to be Extended to Private Sector

Very controversially, the Government have decided to extend the rules for personal service companies in the public sector to workers in the private sector from April 2020.

No Changes in Tax Rates

The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.

There had been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. Note that only the first £2,000 of dividend income is now tax-free.

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