Mandatory MOT tests have been reintroduced with effect from 1 August 2020. So, it may be time to get your car booked in. And as things slowly start to get back to normal, the Chancellor must be thinking about how he claws back the huge deficit from the government support given during the coronavirus pandemic.
A review of capital gains tax for individuals and small businesses has been promised, meaning it could be time to carry out an MOT on your assets, too, to see if any planning can be done ahead of the Autumn Budget.
Because with the current reliefs and low rates of capital gains tax available, there are plenty of opportunities out there.
WHEN DO YOU PAY CAPITAL GAINS TAX?
Capital gains tax is paid on the profit you make when you sell an asset. Currently, there are all sorts of exemptions and reliefs that may apply which can reduce this tax.
SO, WHAT ARE THE GOVERNMENT LOOKING AT?
Rates of capital gains tax – The rates can vary between 10% and 28% but are still significantly lower than the top rate of income tax at 45%. So, could we see a move to align theses rates?
The annual exemption – This is currently £12,300 per annum so any gains that fall within this would be free of capital gains tax, but as we already get a personal allowance of £12,500 for income tax, could this exemption be abolished?
Restricting reliefs – There are many reliefs that mean tax can be lower or deferred, so there’s a risk that these reliefs may be restricted or abolished. This may include the relief which enables tax to be deferred when transferring trading company shares to other family members or making any transfers into a trust. Also, although the lifetime limit for Entrepreneurs’ relief (now called business asset disposal relief) reduced from £10m to £1m in the last Budget, could this be targeted again?
Taxing currently exempt assets – What about assets which currently are exempt from capital gains tax – classic cars, wine, your main home – could the profit on these assets suddenly become chargeable to tax?
WHEN WILL ANY CHANGES TAKE PLACE?
Good question, although the Office of Tax Simplification has just launched a consultation which is due to run until 12 October, which could mean that the Chancellor may be able to respond to this in the Autumn Budget.