Spring Budget 2020 – summary of Private Client measures
12 March 2020
The Spring Budget, delivered by the Chancellor on Wednesday 11 March, was comparatively restrained. However, as ever there were some announcements which may affect private clients and their finances.
Capital Gains Tax
Principal Private Residence Relief
Principal Private Residence Relief is a capital gains tax relief that applies where an individual sells or gives away their only or main residence. It reduces the gain according to the length of time they lived in the property, as a percentage of the total time they owned it. Until now, provided the property has been the individual's main residence at some point while they owned it, the final 18 months of ownership before the sale always qualify for the relief, even if they had actually moved out by then. The Chancellor confirmed the previous decision to reduce this period from 18 months to just 9 months from April 2020.
Accelerated capital gains tax payment and reporting
The Chancellor confirmed another previous announcement that, from April 2020, where disposals of UK residential property give rise to a taxable gain, that gain must be reported and the tax paid within 30 days of the completion. This is a significant change from the current position where, depending on the date of a sale, the tax is not due until between 9 and 18 months after completion.
Capital Gains Tax allowance
The annual capital gains tax allowance for individuals will rise from £12,000 to £12,300 for tax year 2020-21.
Entrepreneurs' relief has long been a very valuable relief which, provided certain conditions are met, reduces the rate of capital gains tax from the typical 20% to only 10% when an individual sells a business.
The relief can currently be applied to gains up to £10m over an individual's lifetime. This limit is being dramatically reduced to just £1m from next tax year. The Chancellor also announced measures that will, in many cases, prevent individuals from making sales between now and the end of the tax year to take advantage of the old limit.
Junior ISA Allowance
Junior ISAs are savings accounts for children which are exempt from income tax and capital gain tax. They can only be accessed when the child reaches the age of 18.
From 6 April, families will be able to put £9,000 a year into the savings account, more than double the current limit of £4,368.
The pensions annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a year. Currently, the standard tax-free annual allowance on pension contributions is £40,000, but this limit starts to taper down to £10,000 for those earning more than £110,000.
The Chancellor has increased the tapered allowance threshold for pensions tax relief from £110,000 to £200,000. This means that individuals with income below £200,000 will not be affected by the tapered annual allowance.
From 1 April 2021, the Government is introducing a new Stamp Duty Land Tax (SDLT) surcharge of 2% where non-UK residents purchase residential property in England and Northern Ireland. This is intended to help to control house price inflation and to support UK residents to get onto and move up the housing ladder. The money raised from the surcharge will be used to help address rough sleeping.
This new charge will be in addition to the existing 3% surcharge on second homes and buy-to-let properties.
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