Rishi Sunak delivered his Spring Statement on 23rd March, amidst a backdrop of the rising cost of living and the atrocities of the war in Ukraine.
Within his speech, Mr Sunak set out his Tax Plan which aims to “help families with the cost of living, support growth in the economy, and ensure the proceeds of growth are shared fairly”.
The Statement itself was fairly light on specific changes to tax laws, although we anticipate further changes will be announced in the Autumn Budget, following a period of consultation.
Below we set out some changes, together with some aspects that were already known.
Read a brief summary of our initial views of the Spring Statement here.
Capital Taxes
Capital gains tax (CGT) rates
The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for private residence relief.
There are two specific types of disposal which potentially qualify for a 10% rate:
- Business Asset Disposal Relief (BADR) which was formerly known as Entrepreneurs’ Relief. This is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses. BADR has a lifetime limit of £1 million for each individual.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly subscribed shares. This has a lifetime limit of £10 million for each individual.
CGT annual exemption
The CGT annual exemption is £12,300 for 2022/23 and will remain frozen until April 2026.
CGT reporting
New reporting and payment on account obligations for chargeable gains on residential property were introduced in April 2020. From 27 October 2021 the deadline to report and pay CGT after selling UK residential property was increased from 30 days after the completion date to 60 days.
Inheritance tax (IHT) nil rate bands
The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2026.
IHT residence nil rate band
The residence nil rate band (RNRB) was introduced in 2017, meaning that the family home can be passed more easily to direct descendants on death.
The rate of the RNRB is £175,000 for 2022/23.
There are a number of conditions that must be met in order to obtain the RNRB.
For many married couples and registered civil partnerships, the relief which is available following the second death can effectively be doubled as each individual has a main nil rate band and a residence nil rate band which passes on the death of the surviving spouse.
Charitable giving
A reduced rate of IHT applies where broadly 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases, the 40% rate will be reduced to 36%.
Other matters
VAT rates and limits
The VAT registration and deregistration thresholds will remain unchanged for a period of two years from 1 April 2022.
The six-month extension to the UK-wide VAT reduction to 12.5% for the tourism and hospitality sectors comes to an end on 30 March 2022 with rates returning to the standard rate of 20%.
Vehicle Excise Duty (VED)
With effect from 1 April 2022 the rates of VED for cars, vans, motorcycles, and motorcycle trade licenses will increase in line with Retail Prices Index (RPI).
For heavy goods vehicles, VED continues to be frozen in 2022/23. The HGV Levy is suspended for another 12 months from 1 August 2022.
Landfill Tax
With effect from 1 April 2022 both the standard and lower rates of Landfill Tax will increase in line with the RPI.
Read more about the Spring Statement
David Robinson
As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners.
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