Tax Top Tips - Three “must do” things for individuals in May 2021

Individuals

1

Property transfers & stamp duty holiday

As you may be aware, temporary reduced rates of stamp duty apply for residential property purchases. The temporary nil rate band of £500,000 will be in place until 30 June 2021. Then from 1 July 2021 to 30 September 2021 the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 on 1 October 2021. 

If you are transferring or acquiring residential property (or considering it) you may wish to accelerate matters and ensure that you complete before the relevant dates to achieve stamp duty savings. Read our “Hot Property” insight for further information.

2

Capital taxes planning

Earlier in the year, leading up to the March Budget, there was a sense of panic amidst rumours spreading that Rishi Sunak was to announce a hike in the rate of Capital Gains Tax (CGT) and possibly abolish the CGT annual exemption. No such changes were announced in March, although it is the view amongst many tax professionals that it is only a matter of time before taxes are increased with CGT still being a likely suspect. 

Just last week it had been announced that the Office of Tax Simplification (a Government body) proposes further reforms to CGT. The proposals range from considering tax liabilities when moving home to getting divorced and an extension of the tight 30-day deadline for settling CGT bills when selling property (which would be a welcome extension).

If you are considering selling or transferring any assets, possibly into trust for example as part of your inheritance tax (IHT) planning, you may wish to accelerate such sales/transfers in light of potential forthcoming CGT changes.

3

Have you considered the use of a family trust?

Our third top tip follows on nicely, particularly if you wish to undertake asset protection and/or IHT planning (otherwise HMRC may be entitled to IHT at the rate of 40% on your death).

A family trust can be controlled by you, it can hold assets for the benefit of your children and remoter family members (with distributions made purely at your discretion) and can remove the value out of your personal IHT estate, reducing your estate to a more manageable value.

Certain assets can qualify for 100% relief from IHT upon transfer into trust and each person generally can transfer up to £325,000 into trust without incurring any tax charges upon entry. 

If you own an interest in a business, you could transfer part into trust pre-sale and secure the IHT ‘business property’ relief which would otherwise disappear if you receive cash into your own hands personally.