The Chancellor of the Exchequer, Rishi Sunak, has promised to pump £175 billion into the British economy in the country’s biggest-spending Budget in almost 30 years. The budget came against the backdrop of slowing economic growth in Britain, fears of the economic impact of the coronavirus COVID-19 and the Bank of England announcing an emergency interest rate cut just hours beforehand.

Much of the media attention has focused on the Government’s pledges to spend on infrastructure projects throughout Britain and ensuring the NHS has all the funds it requires to combat COVID-19.

In comparison to the surge of legislative activity over recent years, the changes of relevance to private clients was also mercifully limited.

Some of the more subtle but salient issues emerging were:

Entrepreneur’s relief

Entrepreneurs’ relief is in point (generally) when there is a disposal of business assets, including disposals of shares in a trading company where the person disposing of them is a director or employee and has at least 5% of the ordinary shares (provided they also carry at least 5% of the voting rights).

Before 11 March 2020 the relief was very generous: the first £10m of gains disposed of during an entrepreneur’s lifetime would be taxed at only 10%. This has now been significantly restricted and only the first £1m of gains are eligible for the low 10% rate (remaining gains being taxed at 20%).

David Scott, Partner in Harbottle & Lewis’ Private Client Department, is not entirely surprised by this reduction stating: “A significant change to Entrepreneurs’ Relief wasn’t totally unexpected but the good news is that it hasn’t been abolished wholesale as some commentators suggested. The even better news is that Entrepreneurs’ Relief will still apply for employees holding Enterprise Management Incentive (EMI) options who would commonly realise gains below £1m in any event.”

Furthermore, David Scott points out that Investors’ Relief seems to have escaped any change commenting: “Investors’ Relief is a similar relief to Entrepreneurs’ Relief (also a 10% Capital Gains Tax rate on a lifetime gains up to £10m) and, while the shares need to be held for three years and the shareholder generally can’t be an employee or director (other than as a ‘business angel’), there’s no minimum shareholding requirement as there is with Entrepreneurs’ Relief.”

Entrepreneur’s relief anti-avoidance/anti-forestalling provisions

As further evidence (if more were needed) of the government’s determination to stamp out tax arrangements which they consider take advantage of inadverted loopholes, they also introduced measures which counteract strategies some clients may have used to realise gains before 11 March even though they were not in a position to find a buyer in the open market so that they could benefit from the £10m limit. In particular, individuals who entered into unconditional contracts with connected persons (for example family trusts) with the view of effecting the transfer at a late date, or persons who disposed of shares in one company in exchange for shares in another also controlled by them, should take advice. Here it is possible that despite a contract being unconditional before 11 March, the full £10m relief will be denied.

Support for businesses investing in research and development

Whilst the government has removed tax breaks for entrepreneurs as individuals, they remain committed to encouraging business as a whole. In particular the budget set the objective of increasing economy-wide investment in R&D to 2.4% of GDP by 2027. As part of this, the Budget sets out ambitious plans to increase public R&D investment to £22 billion per year by 2024-2025.

Gary Ashford, CTA and Partner (non-Lawyer) at Harbottle & Lewis, was buoyant with this announcement stating: “This landmark investment is the largest and fastest ever expansion of support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China.”

Stamp Duty Land Tax (SDLT)

Non-UK tax resident purchasers of residential property must pay a 2% SDLT surcharge on purchases in England or Northern Ireland from 1 April 2021. This would bring the maximum SDLT rate up to 17% on such a purchase. Transitional rules may apply, subject to certain conditions and criteria being met.

This move is very much true to form with successive governments having introduced many new rules targeting UK residential property held by non-UK residents (both corporate structures and individuals) – in particular, in recent years including them within the scope of Capital Gains Tax and Inheritance Tax.

Clampdown on rogue tax advice

HMRC will be making changes to the Disclosure of Tax Avoidance Schemes (DOTAS) and the Promoters of Tax Avoidance Scheme (POTAS) rules, to ensure they get early warnings of schemes being touted around, and provide HMRC with stronger powers over such advisers.

Gary Ashford has welcomed these changes and the introduction of a new strategy for tackling rogue advisers saying: “The Government will launch a call for evidence in the Spring to look at the standards of tax advice provided in the UK, and how citizens can better rely on the advice provided to them.

Remittance basis users

The main feature of the budget from the perspective of RND’s was the absence of legislation focussed on remittance basis users. Hopefully this indicates a long needed period of stability in the area – although we would hope the government will find the time to remedy some of the drafting defect in the 2017/2018 legislation which clients have been encountering.

Additional good news for remittance basis users with overseas trusts is that from 6 April 2020 the ‘official’ rate of interest will be reduced from 2.5% to 2.25%. This rate is used to measure the taxable benefit of certain loans and benefits in kind, including loans and other benefits provided by trustees of offshore trusts to UK-resident beneficiaries.


Again, no immediate legislative change but as Chris Moorcroft, partner, observed: “Tucked away in the Budget documents, away from the headlines, is a consultation on the UK’s funds regime. Nothing unusual there, perhaps, but what interests me is the Government’s stated intention of (wait for it…) using the tax system to make the UK a MORE attractive location to base asset holding companies. An almost novel concept after years of tax changes making the UK less attractive for foreign investment.”


As a way of encouraging savings into pensions, each year an individual is able to obtain tax relief for pension contributions up to their Annual Allowance of £40,000. However, for high earners this relief is restricted; since April 2016 when an individual’s ‘adjusted income’ exceeds £150,000 the annual allowance has been restricted for £1 for every £2 of income in excess of £150,000 down to a minimum of £10,000. The restriction has not applied where the ‘threshold income’ is lower than £110,000. For employee’s who have no control over their pension contributions, such as NHS doctors, this has created problems as they have inadvertedly triggered tax charges by exceeding the annual allowance. Their response has been to simply refuse to work extra hours – which has garnered much publicity.

In response, the government has now raised both the ‘adjusted income’ and ‘threshold income’ for the benefit of all taxpayers. The new thresholds are £240,000 ‘adjusted income’ and £200,000 ‘threshold income.’

The sting is that for particularly high income earners, earning more than £272,000, additional tax will now be triggered once they have contributed £4,000 (instead of £10,000). As Siena Gold, senior associate observed: “It will be interesting to see if there is a corresponding increase in saving into more risky, but still tax attractive, options such as venture capital trusts and EIS eligible investments.”


And finally… some good news for publishers, online newspapers behind a firewall, and readers: from 1 December 2020 e-books, e-newspapers and e-magazines will be zero rated for VAT – a saving of 20%.