Yet Another Chancellor – Big Changes in the Budget?

It will be nearly 18 months since the last Budget and in the meantime we will have had three different chancellors following the unexpected resignation of Sajid Javid. The early years of a new Parliament are a good time to make radical changes and many are predicting significant tax announcements in next week’s budget on 11 March 2020.

Rather than increasing headline tax rates it is understood that the Government are considering the abolition or restriction of many tax reliefs that we have got used to relying on – for example Entrepreneurs’ relief as discussed in our blog of 23 January 2020. This would also have the effect of increasing tax revenue but it is likely that the changes will impact on those who are better off.

Inheritance tax in the Spotlight

We are definitely expecting major changes to inheritance tax (IHT) in the March Budget following two reviews by the Office of Tax Simplification (OTS) and also a report by an All Party Parliamentary Committee (APPC). IHT is perceived as a complicated tax with numerous fairly trivial reliefs and exemptions. Currently the tax only generally applies to transfers on death and gifts within 7 years of death. The APPC suggested that there should be a 10% charge on gifts during someone’s lifetime after an annual exemption of a suggested £30,000 has been exceeded.

A more radical suggestion is the abolition of Business Property Relief (BPR) and Agricultural Property Relief which currently allow a family business or farm to be passed on without paying IHT. The OTS also recommended a review of BPR so it may be worth considering bringing forward the transfer of all, or part of, the family businesses.

Please see our blog of 28 February 2020 for information about how to make use of the current IHT exemptions.

We will of course update you in our next newsletter about the announcements from the Budget.