Page 6 - Budget Newsletter 2021

Gains are currently taxed as the top slice of income, but the rates are lower than those that apply to income not
covered by allowances. Gains are generally taxable at 10% to the extent they fall in the basic rate band (£37,700 in
2021/22 and 2022/23) and 20% if they fall into the higher or additional rate bands. An additional 8% applies to gains
on residential property and carried interest.

The current tax rates and annual exemption mean that if you can arrange for your investment returns to be delivered
in the form of capital gains rather than income, you will often pay no tax on your profits. While investment decisions
should never be made on tax considerations alone, once the £2,000 level of the dividend allowance is exhausted,
favouring capital gains over income when setting your investment goals can be a sensible approach.

One small practical CGT change that was announced was a doubling of the period for reporting and paying CGT on
residential property to 60 days. This takes immediate effect.

PLANNING POINT

If you do not use your £12,300 annual exemption by Tuesday 5 April 2022, you will lose it and a possible tax
saving of over £3,400. If you have gains of over the exempt amount to realise, it could be worth deferring the
excess until 6 April or later to gain another annual exemption and defer the CGT bill until 31 January 2024.
However, remember that CGT on residential property gains (e.g. buy-to-let) is payable within 60 days of sale.

Individual Savings Accounts (ISAs)

The annual ISA investment limit for 2022/23 will remain at £20,000. There will be no change in the £4,000 limit for the
LISA, which was launched in April 2017 to encourage savings by the under-40s. The limit for the Junior ISA (JISA) was
also unaltered, but it was more than doubled to £9,000 last year, as was the Child Trust Fund (CTF) limit.

ISAs have long been one of the simplest ways to save tax, with nothing to report or claim on your tax return. The
arrival of the LISA complicated matters, as it sits somewhere between the traditional ISA and a pension plan. If you are
thinking of a LISA instead of either of these, you would be well advised to seek advice before taking any action.

Over time, substantial sums can build up in ISAs: if you had maximised your ISA investment since they first became
available in April 1999, you would by now have placed over £260,000 largely out of reach of UK taxes.

PLANNING POINT

The first CTF accounts matured in September 2020 as their owners reached 18. The tax benefits continue after
maturity as a ‘protected account’ until instructions to deal with the monies are provided. One option is to
transfer to an ISA. To trace a missing CTF go to www.gov.uk/child-trust-funds/find-a-child-trust-fund.

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs)

VCTs and EISs have been subject to many rule changes in recent years, with some significant reforms being introduced
in Finance Act 2018. Those reforms changed the nature of schemes by raising the element of risk. Most notably, they
introduced a ‘risk to capital’ requirement. This focused the investment made by VCTs, EISs and seed enterprise

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