We had our first Budget from the new Government yesterday and you may think it was all about Coronavirus, but there were some other gems hidden away that you should know about. I’ll make this quick!
In a bit of a surprise move, the limit for Junior ISAs and CTFs will be raised from £4,368 to £9,000. This is a great boost and we would encourage you to use these allowances once you have used up your own ISA allowance – this remains at £20,000 by the way.
Capital Gains Tax (CGT)
The CGT allowance will be increased from £12,000 to £12,300 per tax year for individuals. This is the gain you can realise on an asset or the amount of profit you can take from an investment without being taxed. Anything above that is taxed at 10% for a basic rate taxpayer and 20% for a higher rate taxpayer. If the investment is a property (not your main residence), the tax is 18% and 28% respectively.
This one is a bit of a hit to the business owners pockets unfortunately. The lifetime limit for gains qualifying for Entrepreneurs relief has reduced from £10 million to £1 million – effective yesterday.
You may know that some higher earners have been affected by what is known as the Tapered Annual Allowance – this is the amount that you can contribute to a pension each year and still get tax relief. This was based on 2 things – your Threshold Income and your Adjusted Income. Both of these involve some complicated calculations and the final number then indicates what your annual allowance should be tapered to. The upshot is that these will increase from £110,000 to £200,000 and from £150,000 to £240,000 respectively which should help to reduce the impact somewhat. On the flipside though, if your income is above £312,000, you will be limited to contributions of £4,000 per year into pensions. If you’re currently thinking about topping up your pension, now is the time to get in touch so we can help to maximise the benefit.In addition, the Lifetime Allowance (the most you can hold in pensions without a tax charge) will rise to £1,073,100. This is slightly higher than expected.
The threshold at which you start to pay contributions will increase to £9,500.
As we said in our recent end of tax year update, there is still time to get some planning in before the deadlines, so let us know what we can do to help.