Recent UK government announcements have implications for capital gains tax, inheritance tax, and VAT. The annual tax-free capital gains tax exemption will be significantly reduced, the inheritance tax nil rate band has been frozen, and VAT thresholds remain frozen until March 2026. A new penalty regime is in place for late VAT return submission and payment. Couples going through separation or divorce also need to be aware of new rules regarding the transfer of capital assets. This article provides insights and advice on managing these changes.

Capital Gains Tax

In the Autumn Statement, the Chancellor announced that the £12,300 annual tax-free capital gains tax exemption (or allowance) will be reduced to just £6,000 in 2023/24 and only £3,000 in 2024/25.

This change will mean that those disposing of capital assets will pay more tax, where the new lower allowance is exceeded.

Couples who are in the process of separating, or who have commenced divorce proceedings, need to be aware of new rules taking effect from 6 April 2023 concerning the transfer of capital assets between them as a result of their separation.

If you are planning any capital disposals, please contact us to discuss the best strategy for the disposal.

Inheritance Tax

In the 2023 Autumn Statement, the inheritance tax nil rate band was frozen at £325,000 until April 2028. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2 million.

If you anticipate your estate giving rise to inheritance tax in the future, please contact us to discuss measures that could potentially be put in place, alongside asset distribution within your family.

VAT

The VAT registration and deregistration thresholds continue to be frozen at £85,000 and £83,000 respectively, instead of increasing each year in line with inflation. This will remain the case until March 2026.

Since 1 January 2023, a new penalty regime has been in operation for late VAT return submission and late payment of VAT. The new system is designed to target more persistent offenders, with penalties escalating quickly where defaults reoccur.