In advance of the Budget we had the usual rumours around an increase in capital gains tax (CGT) rates, threats to Entrepreneurs’ Relief, the abolition of business property relief and further amendments to pension thresholds. Thankfully, save some tweaks to Entrepreneurs’ Relief, none of these came to pass.
Instead, we had some amendments to existing rules and an acceleration of the promised changes to the personal allowance and higher rate threshold.
Looking at this second point, the announcement was telegraphed throughout the Chancellor’s speech with multiple references to the “hard work of the British people”. Therefore, the increases of the personal allowance and higher rate threshold were presented as a reward for this hard work. The increases accelerate by 12 months the pledge in the 2015 Conservative party manifesto. As always with the personal allowance, it is worth noting that people with incomes above £100,000 begin to see the allowance abated, so those with income above £125,000 will see no benefit from this increase.
Also on income tax, the plans to make changes to the legislation on rent-a-room relief were abandoned. Although initially this may seem good news, there is still uncertainty as to when those letting properties during short-term periods of absence will qualify for the relief.
Moving on to CGT, while we saw no wholesale changes, there were amendments to Entrepreneurs’ Relief. Some entrepreneurs may benefit from the changes introduced on the dilution of shareholdings. However, others are likely to be adversely impacted by the increased holding period and the changes to what qualifies as a ‘personal company’.
Also, as has been the case in recent Budgets, landlords were further targeted. This time the private residence relief rules were used to discourage landlords through taxation. Specifically, the changes will make it less attractive for individuals to enter into a short term let on their former home by restricting the CGT reliefs available when they do ultimately sell it.
Property owners in general will also need to be mindful of the introduction of a payment on account regime for CGT realised on properties. Rather than simply paying through their self-assessment return for the year of sale, those with a chargeable gain arising on sale of their properties will now need to file a return and pay that tax within 30 days of completion.
Overall, a mixed bag for individuals. We saw no wholesale changes to any aspects of the personal tax system. However, the tweaks that were made will affect multiple taxpayers and detailed advice will be required in many circumstances to fully understand the impact.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.