On Monday 29th October 2018, Philip Hammond presented his third Autumn Budget and the last one before Brexit.
Much has been made about the change in tone about public spending with this budget heralding that the ‘era of austerity is finally coming to an end’.
For business owners however, there are a number of key changes to Entrepreneur’s Relief which need to be highlighted and which may impact both the timing, structure and tax payable on the disposal of a business.
Although there was no change to the level of Entrepreneurs’ Relief which allows business owners potentially significant saving on capital gains tax (restricted to 10% tax on all gains on qualifying assets), the ownership period to qualify for the relief will double to two years from 6th April 2019 (with special provisions for where the business ceased prior to 29 October 2018).
Furthermore, qualifying conditions for Entrepreneur’s Relief will now also be expanded to include the right to 5% of net assets and distributable profits as well as the existing shareholding and voting rights tests.
On the plus side however, entrepreneurs who faced the prospect of losing Entrepreneur’s Relief when diluted below the 5% qualifying shareholding threshold on raising new equity finance can still qualify for the relief up to the point that the dilution took place.
Entrepreneurs Relief clearly continues to be under the spotlight and business owners should not take continuation of Entrepreneur’s Relief for granted and, if you are thinking of selling you company or investing in a business, there may well be significant advantages in completing before 6th April 2019.
Other Autumn Budget highlights for business owners
- Furthermore, a two-year cut in business rates for small retail properties in England is set to come into force from April 2019, worth £900m, together with a £675m fund to help rejuvenate high streets
- Recognising the advantages that online retailers have over traditional clicks and mortar businesses, a new digital services tax is set to be introduced on UK revenues of big technology companies such as Google and Facebook
Other Autumn Budget Highlights
- Although 2018 growth forecasts has been downgraded to 1.3% from 1.5%, forecast growth for 2019 has been revised upwards from 1.3% to 1.6% with a further 1.4% increase in 2020.
- Public borrowing in 2018 is £11.6bn lower than was forecast in March, representing 1.2% of gross domestic product
- An extra £500m have been allocated to prepare for Brexit in March 2019. A commemorative 50p coin will be created to mark the UK leaving the EU (although was not particularly well received on Social Media platforms)
- From April 2019, the National Living Wage will increase by 4.9%, from £7.83 to £8.21 an hour
- For household incomes, the lower rate personal tax allowance will be raised from £11,850 to £12,500 in April 2019 – a year earlier than planned
- Additionally, the higher rate income tax threshold, the point at which people start paying tax at 40% is set to rise from £46,350 to £50,000 in April, once again one year earlier than anticipated
- Further relief for first-time home buyers in the form of an exemption from stamp duty when purchasing a home for up to £500,000
- An extra £160m is being allocated to counter-terrorism police
- The Chancellor confirmed that an extra £20.5bn will be allocated to the NHS over the next five years and an extra £2bn a year invested in mental health projects by 2024
- New environmental promises were made in the form of a new tax on plastic packaging which does not contain 30% recyclable material and £60m used to plant trees
- The Spring Statement next March may be upgraded to a full Budget depending on progress with the Brexit process
At HMT we work with ambitious entrepreneurial businesses at all stages of their development cycle, from sourcing investment for early stage companies through to securing expansion capital to drive future growth and then through to planning for and executing on exit strategies. Managing these key milestone transactions is crucial to success and our experienced partners can guide you through every step of the way and provide further guidance on structuring this in the most tax efficient manner.
For more information about the Autumn Budget and how it can affect you and your business, please contact one of our partners on 01491 579740.