INCOME TAX ALLOWANCES – increasing the personal allowance £12,500 and 40% tax threshold £50,000. This is not new but it is being implemented sooner from 2019 instead. Good news.

ENTREPRENEURS RELIEF – a special 10% tax applies to people selling a business or property related to that business. The main conditions are: Owning >5% of the business or company & Running that business for >12-months.

Disposals after 06.04.2019: the 12-month rule is being extended to 24-months.

PROPERTY CGT-1 – at present if you have occupied a rental property, your period of occupation is exempt if it was main residence (known as Principle Private Residence PPR), you were given an additional 18-months deemed occupation thus exempt period (36-months for disabled or care home residents).

April 2020: This 18-month deemed occupation period is being reduced to 9-months.

PROPERTY CGT-2 – if you sell a property that you have occupied as your main residence for a period, gives you a second allowance – letting exemption. The letting exemption calculation is complicated, but it gives additional relief off your Capital Gain to a maximum £40,000, thus save a maximum £11,200 in tax. If you have never occupied a property, the letting exemption does not apply.

ADVICE: because of this very condition I have advised many clients that if the opportunity arises, it would be very tax advantageous to occupy a property for some time. Whilst there is no minimum period in legislation, it must be your intention to live there as your main residence, to get the PPR & thus by default letting exemption.

April 2020: The letting exemption is to be reformed.

ACTION: IF YOU ARE CONSIDERING SELLING A RENTAL PROPERTY IN THE NEXT FEW YEARS, FOR WHICH YOU HAVE OCCUPIED FOR A PERIOD – WE NEED REVIEW YOUR CGT CALCULATION NOW TO ESTABLISH YOUR TAX IF SOLD BEFORE AND AFTER 06.04.2020; (fees will apply so I will supply a quote).

CAPITAL ALLOWANCES – we depreciate assets for tax. Some years ago HMRC introduced smaller rate for high emission cars currently 8%; the threshold was 160g/km, April 2013 the threshold reduced to 130g/km.

This meant:

• Cars usually depreciated faster than the tax allowance, a car using 18% rate when sold left a balance that was written off for tax in full. E.g. car tax-value of £10000, sold for £8000 = £2000 written off in full in the year of sale.
• A high emission car (using 8% rate), when sold left a balance that could not be written off in full, instead the balance continues to be the written of at 8% until the balance is <£1000, where it can finally be written off as a trivial amount. E.g. above our £2000 balance written of 8% p.a. takes 10-years to get below £1000.
• If you ceased trading the meantime, the remaining balance if lost.
• A high mileage driver who changes cars frequently, often has depreciation continuing on several vehicles they no longer own.

Commercial vehicles need not worry.

April 2018: saw the emission threshold reduce even further to 110g/km catching almost most all cars. The rate we use 18% or 8% is set in the year of purchase. Cars bought before 6.4.18 with emission of 111g/km - 130g/km so use the 18% rate, will continue at the 18% until sold, they will not change to the 8% rate.

April 2019: the 8% rate is being reduced to 6%. All cars currently using the 8% rate will reduce to the new 6% rate. With our example able of a £2000 balance when sold taking 10-years to write off to below a £1000 value, will now take 18-years to write off to below £1000.

ACTION: IF YOU ARE CONSIDERING CHANGING YOUR CAR, IT MAY BE WORTH CONSIDERING A COMMERCIAL VEHICLE OR CAR LEASING. DUAL CAB PICKUP WITH A PAYLOAD >1000kg (payload is carry in the back), ARE CLASSED AS COMMERCIAL VEHICLES. TRUE LEASING, YOU HAND THE VEHICLE BACK AT THE END OF THE A TYPICAL 2-3 YEAR LEASE WITH NO OPTION TO PURCHASE AT THE END. IF THERE IS AN OPTION PURCHASE AT THEN THIS IS NOT A TRUE LEASE, IT IS A VARIATION OF HIRE PURCHASE OFTEN DUBBED AS PERSONAL CONTRACT PURCHASE [PCP].

VAT & DEPOSITS/PREPAYMENTS – at present if you take a deposit for good or services you normally account for vat; if your buyer walks away or cancels and you retain the deposit, you are permitted to reverse the sale and vat, call it compensation which is outside the scope of vat and reclaim the vat already paid; if not paid yet then it is no longer due. This is on the basis the supply of goods or services never took place thus no supply, no vat payable.

April 2019: it will no longer be outside the scope of vat, meaning all deposits & prepayments you receive from customers will remain Vatable, whether the supply of goods or services happens or not.

 Any questions please call me.