What a lot has changed since I last commented on a Budget! That was back in November 2018 and it was Philip Hammond’s third budget as Chancellor and the second autumn one.
At that time, the elephant in the room was Brexit, and whilst this was eventually achieved, in the current crisis it remains to be seen what will happen with negotiations and the next deadline of 31 December 2020! I guess that the focus will be on coronavirus and trying to prevent a business meltdown and, more importantly, many unnecessary deaths.
The Budget, that we were eagerly awaiting, happened on 11 March 2020. The new Chancellor, Rishi Sunak, who had been in office only a few weeks, delivered his Budget speech and what a speech it was! Many had speculated and predicted the content, but it was delivered under the spectre of the coronavirus outbreak. Not surprisingly, that changed the whole focus of the Budget, and on the morning of the Budget, the Bank of England announced a reduction in the interest rate to 0.25%.
However, the current Bank of England base rate is 0.1%. It was cut on 19 March 2020, just a week after being cut to 0.25%. It had been at 0.75% since 2 August 2018.
There were tax freezes, new surcharges, threshold amendments, brilliant one-liners and more.
Measures to mitigate the impact of coronavirus
These were the measures announced in the Budget but with an ever-changing situation, many more measures have been introduced to help businesses and individuals suffering the severe repercussions of coronavirus. The situation is fluid and in the coming weeks, hopefully, the ways and means of getting the support promised will become clear.
- £12 billion package of tax and spending measures including grants and hardship funds for people and businesses affected
- Statutory Sick Pay to be payable from first day’s absence and fully funded by the Government for 14 days; support also for workers in gig economy and self-employed, and relaxed conditions for those who self-isolate
- Business rates relief for the next year increased from 50% to 100% for retail businesses with rateable values up to £51,000; this relief extended to leisure and hospitality businesses as well, and further relief for small pubs
- Small businesses already eligible for 100% rates relief to receive £3,000 cash payment
- Businesses and individuals with cash flow difficulties promised ‘Time to Pay’ their taxes with a dedicated HMRC helpline
These measures are evolving and changing day by day as the country moves into lockdown, as I write this. Nobody knows how long these measures will be in force.
We have a coronavirus page on our website, where we will be providing the latest information and up to date news; I recommend that you have a look at this on a regular basis:
https://www.larking-gowen.co.uk/coronavirus
I thought, therefore, at the moment, I would cover the more mundane matters:
Tax measures with immediate effect
- Lifetime limit for gains eligible for Entrepreneurs’ Relief (taxed at 10% instead of 20%) reduced from £10 million to £1 million for disposals from Budget day i.e. 11 March 2020
- Duties on alcoholic drinks and fuel frozen
Changes announced for personal tax
- The personal allowance will remain at £12,500 for 2020/21
- In 2020/21, the basic rate band will remain at £50,000. i.e. £12,500 plus the basic rate band of £37,500
- In Scotland, however, the parliament has set different tax rates and allowances. Whilst Wales has the power to set different rates, they have announced that it will not vary the UK rates
- Capital gains tax annual exempt amount rises from £12,000 to £12,300 in 2020/21. Rates payable remain unchanged
Pensions
- Increase in thresholds for ‘Annual Allowance pensions taper’ from £110,000 and £150,000 to £200,000 and £240,000
- Lifetime Allowance for pensions increased in line with inflation to £1,073,100
- The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000
National Insurance
Increase in threshold for National Insurance contributions from £8,632 to £9,500
Savings
ISA allowance remains £20,000 per year, but Junior ISA/Child Trust Fund limits rise from £4,368 to £9,000
Dividends
For 2020/21, the dividend tax allowance (DTA) will remain at £2,000. The rates payable after the DTA remain at 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate
Business tax
- Corporation tax rate remains 19% rather than being reduced to 17% as previously announced
- Employment Allowance for small businesses increased from £3,000 to £4,000 of Employers’ NIC
- Research & Development expenditure credit (RDEC) increased from 12% to 13%. (There were no changes to the Research & Development SME scheme.)
- The flat rate £4 per week use of home adjustment has been increased to £6 from April
- No changes announced to ‘off-payroll working’ (IR35) rules, so they will apply to larger private sector employers. However, since the Budget it has been announced that these measures will be deferred for one year until April 2021
Tax measures coming into effect later
- VAT registration limit remains at £85,000
- VAT ‘Domestic Reverse Charge’ on construction services, deferred from 1 October 2019, confirmed for introduction on 1 October 2020
- VAT zero-rating to apply to digital versions of newspapers and books as well as printed versions from 1 December 2020
- Abolition of VAT on women’s sanitary products from 1 January 2021
- Stamp Duty Land Tax surcharge of 2% introduced for non-resident buyers of UK property from 1 April 2021
- Tax relief on ‘red diesel’ removed for most sectors but retained for agriculture, home heating and rail in April 2022
- New plastic packaging tax for manufacturers in April 2022, as well as a shift in Climate Change Levy from electricity to gas
Please take professional advice before making any decisions. If you would like a copy of our full Spring Budget 2020 briefing, please drop me an email or download here:
larking-gowen.co.uk/insights/news-spring-budget-2020-summary/
If you have any queries or would like more information, you can contact me on 01473 834305 or [email protected]
This article is designed for the information of readers. Whilst every effort is made to ensure accuracy, information contained in this article may not be comprehensive and recipients should not act upon it without seeking professional advice. “MHA Larking Gowen” is the trading name of Larking Gowen LLP, which is a limited liability partnership registered in England and Wales (LLP number OC419486). Where we use the word partner it refers to a member of Larking Gowen LLP. © MHA Larking Gowen.
