Budget Day 2020

The Chancellor Rishi Sunak kicked off with a number of measures to support the economy in this fight.

The headline tax change, over which there had been much speculation prior to this Budget, is with regard to Entrepreneur’s Relief.

Introduced in 2008 as an incentive for new business generation, business owners could sell their business and pay capital gains tax at 10% instead of the main rate of 20% up to a lifetime limit, recently £10m.

Luckily after review the Chancellor ignored calls to abolish the relief altogether but cut the Lifetime Limit from £10m to £1m. This means that sale proceeds over £1m will face capital gains tax at the standard rate of 20% for higher rate taxpayers.

This is a major blow for business owners who have focused on building up the value of their business over the years, with the anticipation that they would receive a lump sum on retirement at a favourable rate of tax.

This will impact on our clients and we will need to focus on working together to plan ways to extract value prior to sale in the most tax efficient way.

Another key point that may be relevant here is that the income threshold before the amount you can save into a pension annually (currently £40,000) is reduced is set to rise from £110,000 to £200,000 from April 2020.