Your guide to the latest tax changes
You know we like to keep things simple for you at Fortitude. So rather than you having to plough through all the recent tax change announcements, here’s a handy roundup of the new rules and regulations that could have an impact on your financial plans.
Capital gains tax on homes
There’s a new system in place for anyone paying capital gains tax (CGT) on the sale of a residential property. From 6th April 2020, you’ll have to submit a separate online return to HMRC and pay the tax due within 30 days of your sale completing. Previously, it was all handled within the usual filing and payment timeframes, meaning that you’d have anything between 10 and 22 months to settle up. So, if you’re selling a buy-to-let property, second home or a large estate, this is something that you’ll have to bear in mind.
Inheritance tax allowance
There’s some good news here. When your loved ones inherit your home, they’ll now pay less tax – in fact, they’ll pay nothing on estates worth up to £1 million. Inheritance tax is currently set at 40% but individuals will now be able to pass on £175,000-worth of property tax-free (a rise from £150,000). This is in addition to the first £325,000 of an estate which is already tax-free. So for an individual, the total allowance comes out at £500,000, or for married couples or those in a civil partnership, combine your amounts and you’re looking at an allowance of £1 million.
News from the budget
After only weeks in his new job, Rishi Sunak, Chancellor of the Exchequer, has delivered his budget. He’s promised billions of pounds of extra spending and drastic measures to help combat the Coronavirus pandemic affecting all global economies. Most tax allowances have remained the same, but here are a few important takeaways you’ll want to know about:
Capital gains tax allowance up – the amount you can make from the increased value of your possessions such as a second home, shares or antiques has risen to £12,300. That’s an increase of £300.
Entrepreneurs’ relief cut – if you sell a business, the lower 10% tax rate will only be available on the first £1 million of gains, rather than the previous limit of £10 million. Any gains above £1 million will be taxed at the usual 20%. The Chancellor says that 80% of small business owners will be unaffected, but more tax will be paid by larger businesses or those making significant gains when they sell a business.
Annual pension allowances – for anyone earning over £300,000 the annual allowance has been reduced to £4,000, while people earning less than that will have an allowance of £40,000. In addition to this, the lifetime annual allowance has increased in line with inflation from £1,055,000 to £1,073,100.
Tapered annual allowance – there are changes here too. Currently, if you’re earning more than £110,000 (your threshold income) but your ‘adjusted income’ is more than £150,000, your annual allowance starts to fall, through the tapered annual allowance. Now, this controversial tapered annual allowance will rise by £90,000 to £200,000. It’s designed to help consultants and GPs, but will be of benefit to many others.
Junior ISAs – if you want to start building up a pot for your children or grandchildren, there’s some very positive news. The annual allowance for a Junior ISA or Child Trust Fund will more than double, shifting from £4,368 to a much nicer £9,000.
So what does it all mean?
For most of you, these latest changes won’t have much impact on your plans going forward. It’s really only people in niche situations who may have to take stock and adjust their financial plans for the future. All you really need to know is that we’re here if you have any questions – and you can rest easy knowing we’re on the case as soon as anything does change.
If you’d like to talk about any of these tax changes, please just give us a call.