Budget 2020 Personal taxes
Entrepreneurs’ relief reformed as IHT untouched
Income tax bands remain unchanged
As expected there were no changes to the main income tax bands, although the national insurance threshold was changed and the Chancellor announced changes to entrepreneur’s tax.
The National Insurance threshold will be raised from £8,632 to £9,500 next month. That’s a tax cut for 31 million people, saving a typical employee £104.
After several months of speculation regarding changes to inheritance tax Rishi Sunak’s budget avoided the death tax altogether.
Headline predictions included a reduction of the rate from 40% to 10%, removal of lifetime gifting allowances, and the scrapping of business property relief (BPR).
As for entrepreneur’s relief, the Chancellor opted to follow the FSB’s advice and reform rather than abolish it.
Keith Dinsmore, head of transaction services at Edinburgh legal services firm Vialex, said: “The mood music was that the Budget might abolish entrepreneurs’ relief entirely, however it has not gone that far.
“Rather, entrepreneurs’ relief has been reformed, but significantly so, with the lifetime limit being reduced from £10m to £1m.
“This means that the maximum lifetime economic benefit that an individual may stand to gain from the regime has been reduced from £1m to £100k.
“All other aspects of entrepreneurs’ relief remain the same.
“The relief will continue to be a significant benefit for small to medium size business owners, and employees who acquire shares by way of enterprise management incentive option schemes, encouraging entrepreneurship and risk taking.
“But it will come as a disappointment to, amongst others, serial entrepreneurs who roll the dice again on a new venture after exiting their first business for a relatively modest gain.”