George Osborne opened the debate last week on the tax changes outlined in his Summer Budget. Many of the changes will not affect taxpayers until after the 1st or 5th April next year. Indeed, he set out his stall for progressive changes across a number of taxes until the end of the current parliament in 2021.
Whilst the tax press will be alive with the detail of new legislation as it progresses through the system, we thought it might be useful for practitioners to reflect on the planning opportunities that are available to clients before the end of the current tax year.
- Permanent increase in the AIA from 1 January 2016. Now that the £25,000 limit has been increased to £200,000 from this date, it may be worth canvassing business clients who were “rushing through” investment decisions prior to the end of this calendar year, to advise them (if their level of investment was below £200,000) that they do not have to complete before the 31 December if other issues: profitability, cash flow, or financing; dictate a later completion date.
- Landlords – abolition of the 10% wear and tear allowance from April 2016. Landlord clients, who let residential property, may be advised to defer any expenditure on furniture additions or replacement until after 5 April 2016. In this way they can claim the existing 10% allowance 2015-16 and the actual expenditure in 2016-17.
- Pension contributions. The taper of the annual allowance to a minimum £10,000 for high income earners from April 2016 (income in excess of £150,000) could be a disincentive to save in pensions for this income group. Certainly, they should take advantage of pension top ups prior to this date.
- Inheritance Tax main residence nil-rate band. Although the first slice of this new relief will not be available until April 2017, practitioners may like to dust off the files of clients who will be eligible to make a claim and review current IHT planning.
- Corporation tax – restriction of CT relief for acquisitions and disposals of goodwill after 8 July 2015. Clients who are in the middle of negotiations to buy or sell will need to be updated following this announcement.
These five measures offer firms an opportunity to keep clients up-to-date, the suggestions are by no means exhaustive. As debates on the more contentious of the measures will no doubt be prolonged, any advice given to clients at this stage should be qualified, but opportunities to develop and cross-sell services have been extended by the Summer Budget and should be seriously considered.