Tax planning for the new year

07 / 12 / 2020

It is widely anticipated that major tax reforms will be announced in the March 2021 Budget to help plug the vast fiscal hole triggered by Covid-19. To help get your affairs in order in advance of any reforms consider these top tax planning tips for the New Year:

  • diving into the property market? The Stamp Duty “holiday” is currently available to homebuyers who complete before 31 March 2021. A 0% rate of stamp duty will apply to the first £500,000 for property purchases in England and Northern Ireland. Although the stamp duty surcharge will continue to apply with respect to purchases of additional residential properties, the surcharge will apply on top of the holiday rates;
  • are you a business founder who is thinking of selling your company? Subject to certain conditions, Business Asset Disposal Relief gives a lower rate of 10% on eligible capital gains up to a lifetime limit of £1m. Capital gains tax (“CGT”) is one of the taxes that the Government is looking to reform and this valuable relief could be affected;
  • planning to sell or give away assets? Utilise the CGT annual exemption (£12,300 for individuals and personal representatives for the tax year 2020/21) and lock in the current low CGT rates, both of which are vulnerable to significant change in the coming months with CGT presently being under the Government spotlight;
  • concerned about retirement? Make full use of the top rate marginal tax relief when making pensions contributions; and
  • contemplating passing assets down to the next generation? Consider gifting assets that qualify for inheritance tax (“IHT”) reliefs (such as Business Property Relief and Agricultural Property Relief ) to prevent or reduce an IHT charge on these assets at death. Gifting assets to a trust may be preferable if you wish to keep an element of control; you can currently gift up to £325,000 to a trust without incurring an IHT charge. There is also an IHT annual exemption of £3,000 for lifetime gifts. IHT is another tax that is under the microscope of the Government and could be reformed in the near future.

To discuss any of these options, or for any tax planning advice, please do not hesitate to contact a member of the Private Client team.