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March 2021 UK Budget Change & UK Tax Change | Includes:

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Sharing the March 2021 UK Budget Change & UK Tax change with you, to help you keep ahead of the curve! Read the full article or download our PDF guide here:

How will the UK Budget change in March affect me?

It was recently announced that Rishi Sunak will deliver the UK budget on March 3, 2021. This will be greatly anticipated, as it had been postponed from November 2020 in light of the continuing COVID-19 measures and it will also be the first budget with the UK independent of the EU.

With the COVID-19 bill in excess of £300bn there is little doubt that tax reforms will be put in place to claw some of this money back.

With very little information available about what these tax reforms may look like all we can do is speculate and try to prepare for the impact.

Easy wins are likely to be the name of the game, therefore targeting higher earners and those who are able to pay.

What will the UK Budget Change 2021 mean for me, with the capital gains tax uk rate set to change?

There are a number of potential avenues in which you could be affected in the spring budget should all the proposed and rumoured changes be introduced.

Capital Gains Tax UK rate

In November 2020 the Office of Tax Simplifications published their report with a series of recommendations in regard to CGT.

One suggestion was aligning the Capital Gains tax rate with income tax. Currently there are four rates of CGT between 10% and 28%. It is thought that income tax rates will be raised to 45% and it is likely the capital gains tax rate will increase to match it.

UK Tax Change 2021: Wealth Tax

In December 2020 the Wealth Tax Commission presented their report on proposed changes to the current tax laws. The Wealth Tax would be introduced as a one-off payment of 5% (or a rate of between 3% and 8%) on assets over £500k.

They also endorse that this tax should be applied to global assets of anyone resident in the UK on the appropriate date, or an individual who was resident in the UK for four of the previous seven years. The assets could include main homes, businesses, agricultural business, personal items and pensions over £3,000.

In order to prevent avoidance, the report recommends introducing the Wealth Tax without warning or even retroactively.

UK Tax Change 2021: Social Care/Dementia Tax

Unlike other long-term illnesses like cancer, dementia care is funded by the patient or their family. In November 2020 Sunak pledged in his spending review an extra £1bn for the Social Care sector.

This will likely be dependent on a Council Tax raise which is thought to be the highest possible increase of 2% with an extra 3% coming from the adult social care precept.

UK Tax Change 2021: Pension Tax Relief

There are various tax relief options in place at present on pension contributions.

However, it is thought that the Conservative government may remove additional tax relief applied through self-assessment as well as possibly ditching the higher level of tax relief altogether on pension contributions.

At present it is possible to apply tax relief on private pension contributions up to 100% of an individual’s salary, with the annual allowance of tax-free contributions at £40,000. However, this is likely to change with reduced allowances for those with a threshold income of more than £200k or an adjusted income of £240k.

UK Tax Change 2021: Welsh Tax

Welsh income tax rates, however, are thought to likely remain the same as 2019-2020 meaning rates of 10%, 30% and 35% for the highest.

These will be added to the UK income tax rates. However, whilst income tax is not going to change, they are proposing a new tax for people with second homes of 4% on properties up to £180,000 and 16% for those worth £1.6m.

***A follow up: Please read our suggested, actionable next steps here.

What next? Help from UK Tax Advisors

If you are concerned about how these proposed changes could affect you, please contact the team at Everfair for some no-nonsense advice.

Changes to Capital Gains Tax UK 2021 – how they’ll affect you:

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Capital Gains Tax UK & Inheritance Tax threshold UK in 2021 – what’s ahead? We’ll share our professional recommendations with you now. You can read now, or download the below PDF copy of this information, so that you can read in your own time.

How might Capital Gains Tax UK changes affect me, and what does it mean for the Inheritance Tax threshold UK?

Capital Gains Tax UK changes are coming. A recent report from the UK Office of Tax Simplification (OTS) following a review of the Capital Gains Tax (CGT) has outlined some recommended changes to Capital Gains Tax. The second part of the report is due in 2021.

Changes to UK CGT are likely to be an attractive option to the Chancellor as he looks at ways to reduce the borrowing taken to fund Covid 19 support measures. Here, we’ll share an executive-level breakdown of the changes, followed by a brief overview of how, in our experience, we feel this could impact you.

So, what are the changes to Capital Gains Tax UK?

Well, the report outlines eleven potential changes to the CGT which could raise a substantial amount for the government in increased tax revenue.

The main changes suggested are:

  • CGT rates should be more closely aligned with income tax rates. This could see some current CGT rates double
  • A new relief should be introduced to take account of inflation
  • There should be more flexibility in how capital losses are used
  • If capital gains tax rates are not aligned with income tax, changes should be introduced to the taxation of share based rewards for employees and small business owners, to increase the extent to which these are subject to income tax
  • The annual exempt amount could be reduced from £12,300 per annum to between £2,000 and £4,000 – a dramatic decrease
  • This should however, be combined with a wider exemption for personal effects, taking them out of the charge to CGT
  • A CGT uplift should no longer be applied to assets exempt from IHT, and in fact potentially all inherited assets. Instead beneficiaries will pay CGT based on the price that the asset was purchased for originally. If the uplift on death is removed, the recommendation was that there should also be a greater ability for assets to be gifted CGT-free during lifetime, with again the recipient taking on the original purchase price of the asset
  • There should also potentially be a flat rebasing of all assets for CGT to their value in the year 2000
  • The report also recommended a reassessment of CGT reliefs as the OTS believe the Business Asset Disposal Relief and Investors’ Relief are not working. The suggestion is that the former should be replaced with a different scheme with its basis in retirement and the latter be scrapped.

We’ll now share how exactly these changes to Capital Gains Tax UK will affect you

The long and short of it is that, should these changes in CGT be taken forward by the UK Chancellor, many people could end up paying more in tax to the UK government.

Second-Home Owner and/or soon-to-inherit?

This is likely to be the case if you are set to inherit considerable assets, have an investment portfolio and/or a second home.

An increase in the CGT rate (to align with income tax rates) will no doubt result in a much higher liability being faced by those who choose to sell assets which have increased in value.

Coupled with a reduction in the annual exemption, this could present challenges for those looking to efficiently supplement pension income in retirement with funds from an investment portfolio.

The changes to how the CGT and IHT work together could also end up costing you more in tax pay-outs. Currently if you inherit an asset and sell it, the CGT is based on the difference in value between receiving and selling said asset. However, this will be changed, and it will become the difference between the date it was bought and the time it was sold. If this is no longer the case, there is potentially a double taxation issue to deal with, as both IHT and CGT will now be due in respect of the same asset.

Business Owner or Entrepreneur?

For business owner’s Business Asset Disposal Relief / BADR (otherwise previously known as Entrepreneurs Relief), is to be replaced with a system focused on retirement. This is likely to mean an introduction of an age limit, as well as increasing the holding period from two-to-ten years to ensure only those who have spent years building their businesses will actually benefit from the relief. For many entrepreneurs this will be an unwelcome follow on blow from the reduction in the level of this relief from £10 million to £1 million in April this year.

Our recommended next steps for you

If you are confused about what you need to do regarding these potential changes, or just want some impartial, sensible advice on the best course of action then speak to our professional tax specialists at Everfair today.

Allow us to find the right tax solution for your personal circumstances and set your mind at rest that you are doing the right thing for you, your family and your financial future. ,,https://www.everfairtax.co.uk/contact