On a springboard of a better than expected economic bounce back and lower than feared levels of unemployment, Rishi Sunak's Autumn Budget promised plans to build "a stronger economy for the British people" after the coronavirus crisis.
As financial planners it is our role to encourage our clients to understand the implications now and in the years ahead and the options open to them to make the most out of their wealth and keep their life plans on track.
Generally this Budget had a theme of levelling up, not only geographically but also on wealth with more money to lower income families. There is no change to ISA allowances and only a reporting period change for Capital Gains Tax, so there is little for our clients to worry about.
Gill Philpott, Ascot Lloyd Tax & Trust Specialist, delved into the details behind the speech and highlights for us the key tax takeaways.
Account periods for self-employed and partnership businesses
The Autumn Budget had a large and significant change for self-employed and partnership businesses. Their accounts periods will need to be aligned to 31 March or 5 April.
So, for those self employed or partnerships with accounts year ends other than those two dates, 2023/24 is a transition year and the aligned accounts dates to tax year will operate from the 2024/25 tax year. This brings complexity, planning opportunities, costs and impact on net relevant earnings for pensions.
More paperwork for landlords
Alongside the change of basis period in the 2024/25 tax year the self-employed, partnerships and those with rental income over £10,000 need to report quarterly, not annually as at present.
High income child benefit charge
Another change that could impact clients is, having lost a tax case at the Upper Tribunal on not being able to raise a tax assessment for under declared higher income child benefit charge, the government has now swept aside that decision and given HMRC powers to raise assessments not only for the High Income Child Benefit Charge (HICBC) but also for underpaid gift aid and pension charges.
This affects older clients with lower or non-taxed income and for pension charges, the annual allowance charge, lifetime allowance charge that individuals have overlooked declaring. Discovery can allow HMRC to go back six years.
There is a new Anti Money Laundering (AML) levy for financial sector businesses, at a fixed charge, dependent on turnover.
Business rates reliefs
There was much about business rates reliefs in different forms. While welcome, this is balanced against increased business costs with the increased National Insurance costs and national living wage increase. Some businesses will be winners and others losers.
A clear message was made that the government will not be bailing out businesses whose sectors have economic challenges.
Capital Gains Tax
The only Capital Gains Tax change was an extension for reporting and paying it on sale of residential property from 30 days to 60 days.
The idea that those with wealth should contribute more to the recovery appears to have translated into providing some rule changes that will benefit those on universal credit and keeping allowances frozen for five years (Spring Budget) meaning really only modest contributions from those in the tax system. Another change that will benefit the lower paid is the 20% tax credit on net pay pensions that those individuals currently miss out on.
Oh yes some good news on alcohol levies depending on your favourite tipple.
If you have any questions about the above or should you need any help or advice regarding your financial planning, please don't hesitate to get in touch. Our financial advisers are available by phone, video call, email, or to meet with you in person.
For an overview of the Autumn Budget please click below.