Entrepreneurs’ Relief, a valuable tax break for entrepreneurs, is reportedly under threat in the upcoming Budget 2020.
Entrepreneurs’ Relief was introduced by former Labour chancellor, Alistair Darling, and is available in respect of some business assets, which includes disposal of certain shares. Qualifying gains are taxed at a rate of 10%.
The lifetime limit on capital gains eligible for Entrepreneurs’ Relief has risen from £1m at the time of the scheme’s inception to £10m at the time of writing.
However, some reports suggest that Entrepreneurs’ Relief could be limited or even abolished altogether at the Budget 2020 on 11th March.
The Government is thought to have been swayed by recent research by think-tank, the Institute for Fiscal Studies (IFS), which suggested that not taxing these capital gains at the full rate of 20% is costing the Treasury £2.7bn per annum.
The Conservatives pledged to “review and reform” Entrepreneurs’ Relief as part of its recent election manifesto, adding that the scheme hasn’t “fully delivered on [its] objectives”.
Some of the changes to Entrepreneurs’ Relief that Chancellor Rishi Sunak may be weighing up prior to Budget 2020 include raising the current 10% capital gains tax rate or reducing the £10m lifetime limit. Getting rid of the scheme entirely is not something that has been ruled out either.
One thing you can be sure of is that you’ll be one of the first to know about the future of Entrepreneurs’ Relief in Budget 2020 by signing up for our newsletter.
On 11th March, we’ll be distributing all the key tax talking points regarding the UK’s small businesses to our readers and providing a full round-up of all you need to know.