Chancellor Philip Hammond will be delivering his first Autumn Budget on November 22. JAMES CLARK, of Whittingham Riddell’s Tax consultancy team, considers what could be in store.
Whilst Mr Hammond will be boosted by recent figures that show the Budget deficit is the smallest it’s been for a decade, there is always the issue of Brexit to contend with and the contingency planning for a ‘no-deal’ scenario with Brussels. Could cuts be made in preparation for additional spending requirements?
ENTREPRENEURS’ RELIEF
Recent studies show that the cost of providing Entrepreneurs’ Relief (ER) is more than £2 billion more than the Treasury had originally planned. ER is a low rate of Capital Gains Tax (10%) on the sale of a business or business assets, up to a lifetime amount of £10 million of capital gains. The feeling within the tax industry is that it is this lifetime limit that could be reduced substantially, back to somewhere near to where it started. The ER lifetime limit was £1m when introduced in 2008, before increasing to £2m, then £5m, and finally £10m.
PENSIONS
There have been a number of restrictions to Pension Tax Relief; namely the reduction to both the annual and lifetime allowances, but there is talk of further cuts to come. There is a suggestion that the Chancellor could be considering a flat rate of tax relief on pension contributions of 20%. Currently basic rate taxpayers receive tax relief at 20%, but higher rate taxpayers receive relief commensurate with their tax rate of 40%.
Reports also suggest that older workers could be targeted with tax relief cuts in order to fund a reduction in national insurance contributions for younger workers, in what is being dubbed as a ‘Tax on Age’.
ENTERPRISE INVESTMENT SCHEMES
Share investments in small or start-up trading companies can benefit from generous income tax reliefs. The Enterprise Investment Scheme (EIS) offers income tax relief of 30% of the investment made, while its younger sister Seed EIS gives 50% income tax relief.
The tax reliefs are generous but this should be reflected in the risks of the companies invested in. The Treasury feel that some companies are abusing the EIS generosity and this has raised fears that the relief could be cut, or the amount of companies who are eligible restricted.
Whittingham Riddell LLP will be hosting free Budget seminars across Shropshire and Wales on November 24 and 27, where James will joined by the team to provide a debrief of the Chancellor’s statement. To reserve your place, visit the website budget page or call 01743 273273.