Tax and financial strategies 2020/21

Guardian Tax & Accounting have a wealth of experience in advising businesses and individuals in the London area on a range of key tax and financial planning issues. Here we consider strategies to help you to minimise your tax bill, maximise your profitability and boost your wealth.

The impact of the COVID-19 pandemic has presented the UK with major challenges, which continue to unfold in terms of both scale and complexity. Against this backdrop the government has introduced short-term measures to help businesses.

These measures, being temporary in nature, are not covered here. In this summary we focus on the other tax measures which may assist you, your family and your business when looking at longer term prudent financial planning.

Structure and Buildings Allowance

The rate of Structure and Buildings Allowance available on qualifying investments to construct new, or renovate old, non-residential structures and buildings increases to 3% from April 2020 and results in a welcome reduction of up to 17 years in the write-off period for this capital expenditure.

Entrepreneurs’ Relief - Lifetime Limit

Further reform to Entrepreneurs’ Relief (ER) was not unexpected in the March 2020 Budget and the reduction in the lifetime limit from £10 million to £1 million for qualifying disposals made on or after 11 March 2020 was welcome when compared with the potential for complete abolition of this valuable relief for those in business.

No further consultations are expected on further changes to ER relief in the coming year.

Relief for gains made on private residences

There have been a number of changes made to the Private Residence Relief (PRR) from April 2020.

When the property has been let, or empty for a period of time, the final period of ownership which can be counted towards the relief due to reduce the Capital Gains Tax (CGT) is reduced from 18 months to nine months. Together with with the abolishment of the relief due for periods when the property has been let, for all bar those residing with their lodgers, could result in a higher CGT liability for those selling properties.

Changes have also been made to the relief available when one spouse transfers the ownership of a property to the other spouse, when they do not reside in the property at the time of the transfer. Should the couple subsequently choose to reside in the property, this small change could potentially result in the property qualifying for full PPR relief for the full period of ownership.

Off-payroll working in the private sector

It was the government's intention that from April 2020 the off-payroll working rules, which currently apply to those contracting to public bodies, should also apply to contractors operating through personal services companies or intermediaries working within the private sector.

These rules can have the effect of subjecting the profits made by the intermediary in respect of the engagement (the ‘deemed payment’) to PAYE and NICs as if the contractor was an employee.

Plans have been delayed until April 2021 as a result of the COVID-19 pandemic, giving contractors more time to review contracts and working arrangements with their clients.

Your financial planning strategy

In the face of ongoing change, it is more important than ever to have a robust business and personal financial planning strategy in place, to help ensure that you and your family are financially secure and on course to achieve your long-term goals.

If you're in the London area and would like advice on tax planning strategies, please contact Guardian Tax & Accounting.

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