Government reduces the entrepreneur’s relief lifetime limit
Caroline La Jeune, a partner at Blick Rothenberg said ‘successful entrepreneur’s fears realised with the reduction of entrepreneur’s relief to a lifetime limit of only £1m. This runs counter to the chancellor’s headline commitment to encouraging private businesses.’
She added ‘it will be interesting to see, when the detail behind the budget is revealed, whether the reform of entrepreneur’s relief will be mirrored by a similar reform of investor’s relief, which also provided a 10% tax rate on the first £10m of qualifying investments.’
Robert Pullen, a partner at the firm said ‘business owners will breathe a sigh of relief that entrepreneur’s relief is to be kept – albeit reduced from £10m to £1m, a tax increase of up to £900,000.’
Robert said ‘the chancellor talked-up this budget throughout, however, his ambition seemed somewhat dampened by recent events. No reform of inheritance tax, simplification of SDLT or streamlining of the tax system. Opportunity lost.
He added ‘with fuel and alcohol duties frozen, a £30bn Coronavirus spend and other massive infrastructure projects, where is the chancellor getting his funding? the reforms to entrepreneur’s relief will save up to £2bn a year – nowhere near enough.’
Nimesh Shah, partner at Blick Rothenberg said ‘entrepreneur’s relief goes full circle, and lifetime limit reduces to £1million – now worth £100,000 in savings. When the relief was introduced in 2008, it was worth £80,000.
It has become viciously complicated in recent years with various rule changes and anti-avoidance measures. Now that the relief is only worth £100,000, surely the rules need to be simplified?’
He added ‘at a time when UK businesses are facing hugely uncertain futures, it is disappointing that the government has decided to reduce the entrepreneurs’ relief lifetime limit without any review or consultation.’
Mark Levitt, partner at Blick Rothenberg said ‘with the cut to entrepreneurs’ relief in the budget, business owners should consider paying more into their pensions given the relaxation of reliefs for those earning £200,000.
Capital gains is still lower than income tax and vendors will need to ensure that they have fully utilised their entrepreneur’s relief (where appropriate) with family shareholders.’
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Image credit: Freepik
