Cornwall LivingIssue #104
Steve Maggs from RRL Cornwall discusses the importance of tax considerations, for both individuals and businesses alike.
RRL Cornwall specialises in providing tax advice – increasing clients’ knowledge of taxation and how it impacts them and their business. Steve Maggs, a Tax Partner at the firm, says: “Tax is one of the largest outlays for any individual and business, and therefore should really require the requisite level of consideration and experienced advice.”
As a society, Steve continues: “We underestimate the impact tax has on our lives, and it is a tax advisor’s role to advise on the tax impact of an existing situation or set of circumstances, the impact of changing the situation, and to attempt to advise on projected future changes. Tax changes are moments that enhance this requirement, as changes always create opportunities and risks.”
So, what changes can we expect at the beginning of the new tax year from 6th April? “In the next Budget,” Steve tells us, “we are expecting a number of key changes.” In fact, he reveals: “It will likely be the most significant Budget since 2008.”
Capital Gains Tax
Capital Gains Tax (CGT) is a tax on profits and gains made on the sale of assets, for example property, shares or land, and Steve believes the rates are likely to significantly increase in the new tax year. For those liable for CGT, business owners can currently benefit from Business Asset Disposal Relief (formerly called ‘Entrepreneur’s Relief) – a favourable 10% CGT rate for business assets, including interests in your own business or family business, however Steve explains that “this relief could be significantly restricted or abolished”. What’s more, he says: “A significant reduction in the annual exemption [an individual or business’ tax-free allowance] will likely mean that more people will pay Capital Gains Tax, and that more will have to report disposals to HMRC.”
Inheritance Tax (IHT)
Another form of taxation it’s worth seeking advice on is Inheritance Tax (IHT). This is payable on an individual’s death or in relation to certain gifts made during their lifetime. “The rate is currently 40%, meaning significant tax liabilities can arise if planning is not considered or overlooked,” explains Steve. Just as changes are expected with Capital Gains Tax, he tells us that they’re also expected with IHT, particularly in relation to favourable reliefs that apply to business assets and unquoted shares (called Business Property Relief) and agricultural land (called Agricultural Property Relief). “People owning these assets,” says Steve, “should consider their IHT position, and seek advice where they are relying on these reliefs.”
The next tax year, it seems, is also set to bring with it the removal of higher-rate income tax relief on pension contributions, something Steve explains has been predicted for many years. “Given the heightened strain on the public finances due to the Covid-19 pandemic, you would have to expect that there is a danger of this change now being made.”
There are some rumoured changes that Steve doesn’t foresee coming into force, for instance an annual wealth tax, significant income tax, NIC or VAT changes, or a more radical overhaul of inheritance tax. That said, there are enough changes coming into play next year that it makes sense to take the chance to have a think about how tax is likely to impact you, your family and your business. If that is your New Year’s resolution, then be sure to contact Steve and the team of Chartered Accountants at RRL Cornwall.
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