Spring Budget 2020 – A budget that ‘gets things done’!
Rishi Sunak has delivered his first Budget as Chancellor of the Exchequer, the first Budget of the decade and the first Budget outside the European Union. For anyone watching it was clear that the focus was on ‘getting things done’.
The initial measures concentrated on the disruption caused by Coronavirus and Mr Sunak promised that resources, as are required, will be available to the NHS. He announced swift and decisive action to help the economy cope: providing a raft of measures to help both individuals and small businesses affected. Vital support for cashflow and liquidity will be provided for small businesses by covering Statutory Sick Pay and providing loans and Business Rate cuts.
Whilst a hit to the economy would appear to be inevitable, he stressed it would be temporary and that all measures would be put in place to ensure that the economy continues to grow once the pandemic passes.
The Budget focus then shifted to addressing some of the pledges made by the Conservatives in their election campaign and set out plans for the future.
There had been much speculation that there could be major changes to capital taxes, such as the reform of Inheritance Tax and the abolition of Entrepreneurs’ Relief for Capital Gains Tax. There was no mention of Inheritance Tax in this Budget so current planning opportunities and reliefs will continue to apply. However, we would not rule out change in the future given the comprehensive review published by the Office of Tax Simplification last year.
With regards to Entrepreneurs’ Relief the Chancellor chose to reform rather than abolish and has reduced the lifetime limit of eligible gains from £10 million to £1 million. Entrepreneurs’ Relief will remain a vital relief for those considering retirement or the succession of their business. Advice should always be sought to ensure you qualify, as the rules have become increasingly complex since the relief was originally introduced.
Higher rate tax relief on pensions, also speculated to change, remains intact. Conversely the thresholds at which the annual allowance is reduced have actually increased which will be welcomed by many high earners, the rationale being that current rules were discouraging Doctors from working more hours.
Investment in infrastructure, schools, further education and housing was evident throughout the speech in addition to substantial investment in Research & Development. This eye-watering spending plan has little detail on how it is to be funded.
Substantial reforms to the personal tax system would appear to have been put on hold for now, but the lower earnings limit for National Insurance has been raised which will deliver a small increase in net pay for most workers. With few significant tax raising measures announced, tougher tax decisions may be likely in the Autumn.
As always the content of the speech is the tip of the iceberg with many more announcements contained in the press releases that followed.
Our experts have been busy dissecting all the information from the Chancellor’s announcements and creating useful, jargon free summaries so you can understand how the Budget affects you and your business.
Business and Corporation Tax
Business Rates Reliefs
- The Government announced that the Business Rates retail discount will be increased to 100% in 2020/21 to support small businesses affected by the Coronavirus.
- The relief will also be expanded to the leisure and hospitality sectors.
- The Business Rates discount for pubs with a rateable value below £100,000 will increase to £5,000 in England for one year from 1 April 2020.
- Local authorities will be fully compensated for these Business Rates measures.
- A fundamental review of Business Rates will consider further reforms to the system and will report in the Autumn.
Small business grant funding
- To further support small businesses the government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.
- Businesses that think they may be eligible should contact their local authority.
Time to Pay
- HMRC has set up a dedicated Coronavirus helpline to help those in need and they may be able to agree a bespoke Time to Pay arrangement.
- These tailored arrangements will give a business the time it needs to pay HMRC to support their recovery while operating through any temporary financial challenges that occur.
- HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties and contacts HMRC or pays taxes late due to the Coronavirus.
Coronavirus Business Interruption Loan Scheme
- The launch of a new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.
- The Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
- The Government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value.
British Business Bank’s Start-Up Loans Program
- The Government will extend funding to the end of 2021/22, helping up to 10,000 further entrepreneurs to access finance to start a business.
Enhanced Capital Allowances in Enterprise Zones
- The Government has announced that Enhanced Capital Allowances will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.
Research & Development Expenditure Credit
- The rate of Research & Development Expenditure Credit is increasing from 12% to 13%.
- This measure increases the tax relief for large companies (and Small and Medium size Enterprises in some cases) that carry out qualifying research and development.
Corporation Tax Rate
- The headline Corporation Tax rate will remain at 19% for Corporation Tax periods beginning 1 April 2020. This maintains the rate at 19% rather than reducing it to the previously advised rate of 17%.
If you have any queries regarding your business, and how the changes announced in the budget may affect you, please contact one of our Tax Specialists on 01228 711888.
Capital Gains Tax (CGT) and Entrepreneurs’ Relief
- The CGT annual exempt amount will rise to £12,300 for the 2020/21 tax year.
- With immediate effect, the lifetime limit for Entrepreneurs’ Relief (ER) on gains eligible for the 10% rate reduces from £10 million to £1 million. Capital Gains which would have previously been eligible for ER will be charged at the standard CGT rates.
- The qualifying period in which an individual must meet certain conditions to qualify for Entrepreneurs’ Relief remains at two years.
- From 6 April 2020 Lettings Relief will only be available to individuals who have shared occupancy with the tenant.
- Also taking effect from April 2020, is a reduction to the final period exemption for Principle Private Residence Relief (PPR). This will be reduced from 18 months to 9 months, meaning you will only have 9 months to sell a property once you have moved out to benefit from a full PPR exemption.
- From 6 April 2020 any CGT due on the sale of a residential property is payable within 30 days.
Planning should be undertaken before disposing of any assets to ensure that the annual exemption and any other available reliefs are taken advantage of. Please contact a member of our Tax team on 01228 711888 if you have any queries or are thinking of making a disposal.
Inheritance Tax (IHT)
In the weeks leading up to the Budget there was much speculation around reforms to IHT, in particular Business Property Relief (BPR) and Agricultural Property Relief (APR). However, the Chancellor focused on other things in his Budget and did not make any changes to current legislation. It is likely he has saved any IHT reforms for a later date.
- No restrictions or changes to the IHT reliefs available.
- The residence nil-rate band will increase as planned from 6 April 2020 to £175,000.
- The nil-rate band has remained frozen at £325,000 – the same rate since 2009.
Inheritance Tax is a complex subject, however with careful planning your exposure can be minimised. If you would like to review your IHT position, please do not hesitate to contact one of our Tax Specialists on 01228 711888.
National Insurance (NIC)
From April 2020 the National Minimum Wage rates are:
employees aged 25 and over: £8.72
employees aged between 21-24: £8.20
employees aged between 16-17: £4.55
employees aged between 18-20: £6.45
apprentices up to age 19 or in their first year of apprenticeship: £4.15
(unless rates specified in apprentice training contract
- The Employment Allowance is to increase to £4,000.00 from April 2020.
- Class 1 National Insurance Contributions threshold to rise to £9,500.00 from April 2020, saving a typical employee around £104.00 per year.
- Class 4 National Insurance Contributions threshold will also rise to £9,500.00 from April 2020, saving a self employed tax-payer £78.00 per year.
- Statutory Sick Pay can be claimed from the first day of sickness absence for people who have Coronavirus related sickness or have to self-isolate (in accordance with Government guidelines).
- The restriction to have a GP produced ‘fit note’ to claim sick pay is withdrawn throughout the duration of the Coronavirus outbreak. Instead employees will obtain a notification from NHS 111.
- Employers with fewer than 250 employees can reclaim from the Government their Statutory Sick Pay for Coronavirus related sickness, limited to 2 weeks per employee.
- Those who are not entitled to Statutory Sick Pay, such as the self employed who instead can claim Employment & Support Allowance, will be able to make a claim if affected by Coronavirus, or self isolating, from the first day of sickness rather than the eighth day.
- Employers Allowance will be withdrawn for Employers who have an Employer National Insurance liability of £100,000.00 or more in 2020/21.
If you have any questions on payroll matters our specialists are on hand to help, give them a call on 01228 711888.
Personal Income Tax
- The tax free personal allowance remains as previously announced at £12,500 for the 2020/21 tax year.
- The higher rate threshold remains at £37,500 from April 2020.
- The 0% starting rate band for savings income remains at £5,000 for the 2020/21 tax year.
- The Government have confirmed that three new Social Security benefits in Scotland are exempt from Income Tax – Job Start, Disability Assistance for Children and Young People and the Scottish Child Payment.Today’s Budget saw no significant changes to any of the Income Tax rates and rules in place.
If you have any Income Tax queries, please contact one of our Tax Specialists on 01228 711888.
Savings & Investments
- The tapered annual allowance threshold for pension contributions will be raised by £90,000. This means that from 2020/21 the “threshold income” will be £200,000 and individuals with income below this level will not be affected by the tapered annual allowance.
- From April 2020, the £40,000 annual pension allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000.
- The minimum level to which the pension 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 over £300,000.
- The lifetime allowance increases to £1,073,000 throughout a working lifetime from tax year 2020/21.
- The annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000 from April 2020.
- No change in existing legislation on State Pensions. The triple lock still applies meaning an increase in State Pension income equivalent to the average rate of earnings growth for pensioners from April 2020.
- No increase in the annual ISA allowance, this remains at £20,000 per person, the same as it has been since April 2017.
David Allen Financial Services, as an independent financial adviser, can help you make the most of your savings and investments as well as ensuring your retirement planning makes the most of the tax advantages available. We can also help you plan for a home purchase or remortgage via our Mortgage and Protection Advice Team.
For an initial discussion to see how we can help, please contact one of our team on 01228 711 881.
Tax Credits & Benefits (Universal Credits)
Temporary measures are to be introduced to help those who need to be off work due to the Coronavirus, these include:
- Employment and Support Allowance will be payable for people directly affected or those self-isolating, according to Government advice, from the first day of sickness, rather than the eighth day.
- Individuals will be able to claim Universal Credit (UC) and access advance payments where they are directly affected, or self-isolating, without the current requirement to attend a jobcentre.
- For the duration of the outbreak, the requirements of the minimum income floor in UC will be temporarily relaxed for those directly affected, or self-isolating, ensuring self-employed claimants will be compensated for losses in income.
Some additional changes which were announced to support the most vulnerable:
- Bringing an end to the benefit freeze and increasing the working age benefits by 1.7% from April 2020.
- Providing further support to UC claimants by ensuring they can repay debts in a more manageable way by reducing the maximum deductions from their standard allowance from 30% to 25%. It will also give claimants up to 24 months to repay advances.
- Giving certainty to people with disabilities claiming Personal Independence Payments by guaranteeing an award period of at least 18 months.
If you have any queries regarding your Tax Credit or Universal Credit claim please contact one of our Tax Specialists on 01228 711888.
VAT & Duties
- Duty on beer, spirits, wine and ciders will be frozen.
- Fuel duty will be frozen for a record tenth year.
- To support the haulage sector, the Government will freeze HGV Vehicle Excise Duty for 2020/21.
- From 12 March 2020, the Government will reduce annual Vehicle Excise Duty liabilities for most new motorhomes to a flat rate of £265 which will rise to £270 for 2020/21.
- 1 December 2020 will see the introduction of e-publications being zero rated for VAT meaning that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.
- Now that the UK has left the EU, it can reduce the costs of essential sanitary products for woman in the UK. From 1 January 2021, the tampon tax will be abolished meaning woman’s sanitary products will be at the zero rate of VAT.
- In Spring 2020 the Government will launch an informal consultation on the VAT and Excise treatment of goods crossing UK borders after the EU exit transition period.
- The VAT registration and deregistration thresholds will not change for 2 years from 1 April 2020. The taxable turnover threshold, which determines whether a person must be registered for VAT, will remain at £85,000. The taxable turnover threshold for deregistration will remain at £83,000.
- The VAT domestic reverse charge for buildings and construction services was delayed to 1 October 2020. This is being implemented to prevent losses through so-called ‘missing trader’ fraud.
- Tobacco duty rates on all tobacco will continue to rise by 2% above Retail Price Index (RPI) inflation. This will come into effect from 6pm on 11 March 2020.
- Duty on hand-rolling tobacco will increase by 6% above Retail Price Index (RPI). This will come into effect from 6pm on 11 March 2020.
- From 1 April 2020 Vehicle Excise Duty rates for cars, vans and motorcycles will increase in line with Retail Price Index (RPI).
- The Government have announced they will remove the entitlement to use red diesel from April 2022 except in agriculture, fish farming, rail and for non-commercial heating (including domestic heating).
- The Government will introduce a 2% Stamp Duty Land Tax on non-UK residents who buy residential property in England and Northern Ireland from 1 April 2021.
For more details on what was announced in the 2020 Budget in relation to VAT and other duties, please contact Julie Osborn on 01228 711888.
A few other items were announced which may be of interest.
- Couples in Civil Partnerships will now be able to inherit a State Pension entitlement from their partner, bringing this in line with married couples.
- From September 2020, all new and existing students on nursing, midwifery and allied health courses in England will benefit from an additional non-repayable maintenance grant to help with living costs of at least £5,000 per year. A further amount up to £3,000 will be available for eligible students with childcare responsibilities.
- Hospital car parking fees in England will be scrapped for those in greatest need, this will include patients with a disability and/or terminal illness and their families, patients with regular appointments, parents of sick children staying overnight and NHS staff working night shifts.
- The plan to make the A66 a dual carriageway will be taken forward with spending to take place on schemes between 2020 and 2025.
- £500 million will be provided over the next five years for electric vehicle charging infrastructure, to include a Rapid Charging Fund to help businesses with the costs of connecting high-powered charge points to the electricity grid.
- Further funds are to be made available starting in 2021 for a capital investment programme for flood defences.
- Extra funds are to be made available to help repair flood defences that were damaged in the winter 2019/20 floods.