Budget time is the key season of the year when people are talking about tax and likely to ask your opinion about its content – providing you with a perfect marketing opportunity to tell people what you do and how much you know about all things money.
In a tasteful, modest kind of way, naturally. So it’s worth boning up on the Budget. And from a strictly practical point of view, there is also much to be said for knowing what’s in the chancellor’s proposals.
So it seemed like a good idea to provide a few conversational gambits based on the contents of the Budget:
“It is interesting to see how some of the bad news creeps out well after the Budget – when the spotlight has moved on. Like the proposed new probate fees for example.”
Six days after the Budget the government let it be known that the cost of getting a grant of probate was about to rocket for many estates in April 2019. Currently, the fee for a grant of probate is a flat £215 if the estate is £5,000 or more. Under the new rules, the fee will be 0.5 per cent with a maximum of £6,000 and the exemption will rise to £50,000. Now there’s a death tax, if you like.
“Entrepreneurs’ relief was under attack before the Budget. So it is a good thing that it has been largely unchanged. Alternatively: keeping it was a wasted opportunity.”
You can choose the option that will suit your political views – or perhaps those of your interlocutor, depending on how much you wish to ingratiate yourself. Some commentators feared entrepreneurs’ relief would be abolished or at least severely cut back.
The big change announced in the Budget was actually the doubling of the qualifying period for holding a business asset from one to two years. In fact, two years is not so bad really. Readers with long memories will recall that it took 10 years to qualify for the full – and much more restricted – retirement relief.
The other change is that it won’t be enough to qualify for entrepreneurs’ relief by holding at least 5 per cent of the voting rights in the company. It will also be necessary to have a right to 5 per cent of the distributable profits as well as assets available for distribution on winding up. This change was aimed at people who have been using “unusual” share structures to get entrepreneurs’ relief but probably didn’t have a meaningful economic interest in the company.
“The attack on buy to let, rentals and second homes goes on – and some of the new changes could hit quite a lot of people.”
When you sell your main home and you have either let it or you own two properties for a time, only the last nine months of ownership of your old home will automatically be free of capital gains tax. Back in 2014 the automatic CGT-free ownership period was three years. Then it came down to 18 months and from April 2019 it is now due to halve again to just nine months. That will affect a lot of expatriates and others who move out of their main residence, let it and then decide to sell.
The other measure is aimed at people who claim rent-a-room relief for periods when they leave their main residences to be occupied by tenants. Also from April 2019, the £7,500 rent-a-room relief will only apply where a landlord and tenant share the occupancy of the property. This will affect – among others – many Airbnb renters and people who move out of their homes during Wimbledon week to let them on reassuringly expensive rents to players, their entourages and prosperous tennis fans.
“HM Revenue and Customs is keen to get its hands on cash that it’s owed when a company goes bust. Crown preference is being partially reintroduced.”
Back in the day, HMRC could claim preference as a creditor when a company became insolvent. That was abolished in the 80s – but it is coming back, at least in part. From April 2020, HMRC will be given greater priority over the claims of other creditors when it comes to VAT, PAYE income tax and employees’ national insurance contributions and construction industry scheme deductions.
And from 2019, directors could be made personally liable for taxes a company owes if a company deliberately goes into liquidation to evade or avoid tax.
There are lots of other things to keep us talking after the Budget: the proposed introduction to the private sector of the off-payroll rules that have been so effectively applied in the public sector (at least in the view of HMRC). Pity people with personal service companies.
The lifetime allowance for pensions going up to just £1.055m – but no change to the annual allowance – the lack of significant change to IHT and so much more besides.