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With a tough budget expected on 24 February 2021 to fund the Pandemic losses and the roll-out of the vaccine we could potentially see increased taxes through Dividends Tax, Capital Gains Tax, Donations Tax and the introduction of a new Wealth Tax.
Dividends Tax
Although currently at 20%, this could be increased – the effective date could be 24th February 2021 (the date of the Budget announcement) and not only effective from the following tax year.
A potential increase could be to 22.5% with the justification being that this creates equity between distributed profit and individual marginal rates.
Should you have excess reserves and are currently considering declaring dividends to your shareholders, please consider documenting these decisions before close of business on 23rd February 2021.
We can assist you with the correct documentation to record these decisions, but we would need to be advised in writing by Friday 19th February 2021 latest to account for the necessary resolutions and disclosures.
Capital Gains Tax (CGT)
With individual tax rates and Corporate CGT rates already high, there are very few areas left to generate further revenue. The areas that may be targeted include Dividend’s Tax and CGT.
Although the individual’s current CGT inclusion rate is 40%, the thinking in the market is that this rate could be increased to at least 50%.
If you are considering liquidating any of your personal or business investments, consider realising any gains now rather at the potentially lower CGT rate. This is also important should you have any older assets with a low base cost – it may be worth realising the profit in the assets now and buying them back at the higher base cost to minimise the future CGT on those assets.
Reduce your Asset Values to Save Tax
Should you have any personal assets of a higher market value, consider donating these to your spouse now free from Donations Tax to minimise the impact of the introduction of a Wealth Tax which may be based on a percentage of the market value of your Estate. There are special Tax provisions to consider relating to inter-spousal donations so please contact us to assist you.
There is also talk in the market that the inter-spousal Donation and Estate Duty exemption may be reduced or withdrawn in the Budget so take advantage now whilst it is still available!
You could also use this opportunity to make the pandemic work for you as now is the time to restructure your business and unlock the value ahead of the Budget. A corporate restructure could further reduce the impact of the introduction of a Wealth Tax based on a percentage of the market value of your Estate which includes business assets if owned personally by you or your spouse.
We can assist you with the correct documentation to record these decisions, but we would need to be advised in writing by Friday 19th February 2021 latest to account for the necessary resolutions and disclosures.
The above is all part of extremely complex legislation, which is continuously evolving and subject to many rules. We would strongly urge you to talk to Alexis, Dave, Juanita, Fatima or Danie before you take any action.
