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George Lyall explains why proposed asset transfer changes could work in favour of longer-term Investors.
After reflecting over the last 24 hours on what is now widely regarded as a “steady as you go” budget for our new Chancellor, I found a few nuggets that are seemingly quite relevant for our Traditum clients. With changes in #SEIS, a 50% increase on annual tax-free pension saving and #Capital Gains Tax changes during #asset transfer between spouses, there are small and yet not insignificant changes that mean you should reconsider your #investment strategies. The asset transfer changes will allow up to 3 years more thinking and negotiating time before attracting CGT at the current market value – a win for those who invested in patient capital and longer-term investment strategies. Let’s hope these changes proceed through Parliament without challenge!
1 – SEIS (Seed Investment Enterprise Scheme)
Legislation will be introduced in Spring Finance Bill 2023 to amend the limits on the size and age of the companies that can access the SEIS as well as on the amounts that they can raise and on which investors can claim income tax and capital gains tax reliefs. The following are to be increased:
- The ceiling that applies to the investment a company can raise in the relevant period and on which investors can claim relief – from £150,000 to £250,000.
- The limit that applies at the date of investment on the “gross assets” a company can have – from £200,000 to £350,000.
- The age limit that applies to the definition of a company’s “new qualifying trade” at the date of investment – from 2 years to 3 years
- The annual limits that apply to the investment amount on which individuals can claim income tax and CGT re-investment reliefs – from £100,000 to £200,000
2 – Pensions – Lifetime Allowance
- Annual tax-free pension savings allowance increased by 50% from £40,000 to £60,000
- Lifetime Allowance on pension savings scrapped so people will now be allowed to accumulate as much as they want in their private scheme without being taxed (currently a £1.07m threshold)
3 – Capital gains tax – “no gains, no losses”
Legislation will be introduced in the Spring Finance Bill 2023 that will provide that:
- Separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain/no loss transfers.
- No gain/no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement.
- A spouse or civil partner who retains an interest in the former matrimonial home be given an option to claim private residence relief (PRR) when it is sold.
- Individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner.