ER Relief Benefit under Conservative or Labour Governments

We have been watching the election developments closely and as you are probably aware, Labour have now published their manifesto. It is important to read the proposed hikes to corporation tax and the plans to abolish entrepreneurs’ relief. Whilst the outcome of the forthcoming general election is unknown, we are planning for all eventualities.

We are on hand to have any discussions regarding your planning and will be able to develop any further investments required to offset what will be a huge hike in tax following a sale of shares. As ever, we do not wish to impose but want to make it clear that we are ready to act swiftly in the event of any proposed change to the rates.

Here is the critical wording from the manifesto:

Entrepreneurs’ relief will be abolished so when selling a business capital gains will be taxed at the marginal income tax rate. There will no longer be a separate annual exempt allowance for capital gains, above a de minimis threshold of £1,000.
Generally capital gains will be taxed at the same level as income tax while the lower income tax rate for dividend income will be removed.

This will ensure that the rate of tax upon sale of shares will increase from the current entrepreneurs concession of 10%; £10,000 in every £100,000 of capital generated to 40-50% £40-£50,000 in every £100,000 – a huge hike.

A conservative government may not make such a sweeping move and we are watching the position carefully. Although Labour are behind in the polls, there remains real uncertainty which way the voting will go on the 12th December with the added debate of Brexit still on-going.

However, there is strong belief that the Conservatives will also abolish ER benefit, leaving a standard rate of Capital Gains Tax to pay, in a snap January budget – please click on the links below if you wish to read further views on this:

Tech Market View of Conservative Manifesto

Telegraph View of Conservative Manifesto

Please get in contact should you wish to discuss any initiatives in preparation for the requirement to accelerate any plans you have with us. If you are considering further de-risking then it would be prudent to act in the short-term.