summarised Mr Sunak the new Chancellor’s 2020 budget for you.
Insurance (NI) threshold raised to £9,500 up from £8,632
taper increased to £200,000 from £110,000 – this helps pension funding
ISA annual limits increased to £9,000 from £4,368. Adult limit remains at
the UK the income tax rates and allowances remain at £12,500 for the personal
allowance and £50,000 the higher rate threshold
Capital Gains Tax (CGT) allowance has increased to £12,300 for individuals
Inheritance Tax (IHT) residence nil rate band increases to £175,000
taking the overall IHT allowance up to potentially £500,000 per person
Relief lifetime allowance reduced to £1million
working rules (IR35) reform still scheduled for April 2020
tax rate to remain at 19%
Yorkshire Building Society has become the latest big name to launch an interest-only mortgage. If you have a reasonable deposit saved up please give us a call.
mortgages were once common but virtually disappeared after the financial
crisis, amid fears that many borrowers were not setting aside enough money to
repay their debt. Borrowers do not repay any capital during the course of the
loan, so when their mortgage term ends they need to pay back their equity.
lending criteria, borrowers have to show lenders that they have a repayment
strategy in place.
were twice as many interest-only products on the market earlier this month as
there were six years ago, according to Moneyfacts.
Paying out for voluntary National Insurance contributions now could improve your state pension by up to £4,000 – but it’ll cost more if you wait until after 5 April 2019.
who reaches state pension age after 5 April 2016 and has a gap in their NI
payments between the 2006-07 to 2015-16 tax years has until April 2023 to
‘plug’ the holes by making voluntary contributions.
In the new tax year, the amount you pay for voluntary National Insurance
(NI) will increase to a more expensive flat rate for all tax years. But, if you
pay between £600 and £700 – the equivalent of £100 a week between now and April
– you could pay off a missing year in your NI record and secure thousands of
pounds of state pension when you retire.
From April, the government will rewrite child benefit forms to highlight
the risks to stay-at-home parents’ retirement income if they fail to register
for child benefit. The forms are available online and given to new mothers in
Registering for child benefit allows parents with children under 12 to
build up their entitlement to state pensions, even if they do not pay national
insurance (NI) contributions.
However, a tax on child benefit for higher earners, introduced in 2013,
has discouraged hundreds of thousands from claiming the perk. Since 2013,
516,000 parents have opted out of child benefit — 84% of them women.
About 1.1m families are affected by the tax charge on child benefit,
which reduces payments when one parent earns £50,000 or more and wipes out the
benefit for those who earn £60,000 and above. The rule applies to married and
Families with a higher earner can opt not to receive any child benefit.
However, they still need to register and opt out. Parents who fail to do so
miss out on the NI credits.
The 2018 Budget has caused significant concerns for shareholders
in companies that have multiple share classes carrying different rights and
entitlements (also known as alphabet shares).
The new proposed rules change the definition of ‘personal company’
in the ER legislation in such a way as to prevent shareholders in a company
with alphabet shares from claiming ER.
On 21 December 2018, the Government proposed a significant
amendment to the Finance Bill rules defining what constitutes a ‘personal
company’ for ER purposes.
legislation retains the old qualifying criteria (that the shareholder must have
at least 5% of the ordinary share capital of the company and 5% of the
voting rights) but adds in two new conditions, at least one of which will need
to be met:
- The shareholder must
be entitled to 5% of the profits available for distribution to equity holders and
5% of the assets available for distribution on a winding up (these were the
changes originally announced in the 2018 Budget);
- In the event of a disposal
of the ordinary share capital of the company the shareholder would be entitled
to 5% of the disposal proceeds.
Additional provisions set out the process for determining whether
the second test is met at any one time. The legislation does not define
the term ‘proceeds’, which implies that it may extend to some payments made to
debt-holders on a sale of a company.
In its rationale for making the changes, the Treasury has stated that it has laid these amendments to ensure that the conditions for benefitting from the relief operate as intended and to continue ‘supporting enterprise creation and growth in the UK.’
…will be extended in
England and Northern Ireland to apply to all first-time buyers purchasing
residential property worth up to £500,000 through a qualifying shared ownership
scheme. The relief will also apply to shared ownership property buyers who have
already paid SDLT on the initial equity stake and rental amount since the
introduction of the relief on 22 November 2017. They will have a year to make a
backdated claim for the relief. This measure will be effective from 29 October
lettings relief can be claimed by
individuals who let out a property that is, or has in the past been, their main
residence. From April 2020, the government will reform lettings relief so that
it is only available to individuals in shared occupancy with a tenant.
the final period exemption means
that people do not have to pay CGT on gains made in the final 18 months of
ownership. From April 2020, the exemption will be reduced to 9 months. There
will be no changes to the 36 months final period exemption available to
disabled people or those in a care home.
who replace their main residence can reclaim
the SDLT where the new home was purchased before selling the old, subject
to the old residence being sold within 3 years of the new home purchase.
The residence nil-rate band (RNRB)
increases to £150,000 from £125,000 from 6 April 2019 and to £175,000 from 6
April 2020; allowing some couples to leave up to £950,000 to
future generations free of IHT.
Capital gains tax arising on the disposal of any type of asset can be deferred by a subscription for EIS shares. To qualify for the relief the investment must be made during a period covering one year before the gain arose and three years thereafter.
The tax on any gain deferred in this way only becomes due on the subsequent disposal of the EIS shares or if the investor ceases to be UK resident within three years of issue of the shares. However, the gain can be deferred again by using the sale proceeds to make another EIS subscription.
There is no limit on the amount that can be invested in EIS shares but only the first £1,000,000 investment in a tax year will be entitled to income tax relief at up to 30% (for 2017-18).
…and, from 6 April 2017 interest payments from OEICs, authorised UTs, investment trusts and peer-to-peer loans are also paid gross. All individual taxpayers (so not trustees) are entitled to a £2,000 dividend allowance (was £5,000 in 2017/18) and to a personal savings allowance of £1,000 (basic rate taxpayer) or £500 (higher ratetaxpayer). On income in excess of these allowances basic rate for dividends is 7.5%, higher rate is 32.5% and additional rate and trust rate is 38.1%. Equivalent income tax rates on savings income are 20%, 40% and 45%.