On The Spot Blogs
Springing Tax Changes On Us From April 2020
With the spring Budget less than two weeks away, it's easy to forget some major changes due to come in this spring unlikely to be changed by the Chancellor.
Property Interest Tax Relief - Full restriction
Four years ago this seemed a long way off, but we're now here. From April, there will be no tax deduction for interest on your buy-to-let mortgage. You'll get a calculated tax credit at 20% offset against your tax bill, but your taxable income is reduced only by repairs, professional fees, void period costs, etc.
This means you're more likely to find yourself in the higher rate tax band than before or having to pay back child benefit. Or even at the £100k threshold where your tax free personal allowance starts to get taken away.
Property Sales - Reporting and paying capital gains tax within 30 days of completion
A major change for UK resident taxpayers requiring taxpayers and their conveyancing solicitors to take action early on in the sales process. Your accountant will need to know of the sale and complete an online form to calculate the capital gains tax due and advise you how much tax to pay within 30 days of completion. A payment reference is required, so the practical dealdine is a few days before that.
Your home where no capital gains tax is due is exempt, as are small gains under £12k, or where you have sufficient capital losses to offset the gain.
Property Sales - Reduced reliefs available
Unfortunately, at the same time, presumably deliberately(?), there will be higher property taxable gains due to changes in the calculation of capital gains tax on the sale of a home in which you lived and subsequently rented out.
The valuable 'lettings relief' is going completely and the deemed tax free period before sale is being reduced from 18 months to 9 months. Apparently, 9 months is plenty of time to sell a property. I'm not sure many estate agents would agree with you in this market.
IR35 and Off-Payroll Working - Your client will determine your status
Getting a lot of publicity already, the Chancellor has said this will receive a soft landing. However, it has spooked many large businesses into cancelling all freelancers and consultants, reducing the work available in this sector despite suiting both parties very well and where significant amounts of tax are still paid.
Try to agree with your client that you are independent and shouldn't be treated like an employee. If this doesn't work, you should become an employee 'proper' and receive all the benefits associated with it. IR35 is the worst of both worlds!
Research and Development - R&D - Restriction to payable tax credits
The cash refund part of R&D paid to loss making SMEs will be restricted to 3x their PAYE bill. As many SMEs don't have much of a PAYE bill, for all practical purposes this is being taken away. It has been a useful cash injection for many start ups who will now need to fill the gap from other sources such as external investors, crowdfunding or owner loans.
At least when they take on a freelancer, SMEs aren't affected by the new IR35 rules mentioned above and can carry on as before.
Electric Cars (EV) - Super Charged Tax Reliefs
To end on a positive note, non ICE cars are really worth a look at for the business owner. Where your company buys a 100% EV, there are 100% capital allowances to reduce your taxable profits and no taxable benefit on you, with minimal increases over the next few years.
Keep an eye on the rules after that, but, for now, you may want to take advantage of some good tax news amongst the less-appealing other tax news referred to above.