Below are the most pertinent posts announced by the Chancellor in his Budget speech yesterday:-
Off-Payroll Working Rules in the Private Sector (“IR35”)
As expected, the chancellor has gone forward with the extension of the off-payroll working rules (IR35) to the private sector with effect from April 2020.
The IR35 rules are as follows:
CGT letting relief and final period exemption
When someone sells their main residence, and it has been rented out at some time, there have been two reliefs available to reduce the capital gains tax payable – Lettings Relief (worth up to £ 40,000 of the gain being exempt from tax) and Principal Private Residence Relief [PPR] (proportion of the time you lived there plus the last 18 months being exempt from tax).
From April 2020 the government will reform Lettings Relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption [PPR] will also be reduced from 18 months to 9 months.
This relief is available when someone sells or disposes of all or part of their ‘trading’ business, resulting in a capital gains tax rate of 10% (rather than a mixture of the 10% and the higher 20% tax rate)
Up until now, one of the criteria to qualify for this 10% rate has been that one must have owned the asset for at least one year.
Legislation will be introduced in Finance Bill 2018/19 for disposals made on or after 6 April 2019, to increase this minimum period throughout which certain conditions must be met to be eligible for Entrepreneurs Relief from one year to two years.
Personal allowance and higher rate threshold
The commitment to raise the personal allowance and higher rate has been accelerated. These will increase to £12,500 and £50,000 respectively from April 2019 which is one year earlier than expected.
Rate of Corporation Tax
The rate of Corporation Tax will fall from 19% to 17% from 1 April 2020.
The tax-free dividend allowance is unchanged at £2,000.