Budget 2020 – What it means for you
With the completion of Mr Sunak’s first Budget speech, it is clear the Chancellor has spared no expense, stating his budget will promote the ‘largest sustained fiscal boost for nearly 30 years’. The Budget started by announcing fiscal measures to aid the prevention of the Coronavirus, but also promised billions in investment of infrastructure and the costs of living.
But how does this affect you as a business, employee or individual?
It was no surprise that the first topic of the Budget was in an effort to combat the current pandemic. The Chancellor hopes to ensure the policy response is ‘temporary, timely and targeted.’
- Statutory Sick Pay – any individual will be entitled to claim sick pay from day 1 if advised to self-isolate, even if they have not presented any symptoms.
- Businesses with less than 250 employees will be entitled to refunds from the government for up to 2 weeks of Statutory Sick Pay.
- Introduction of a Coronavirus loan scheme to cover costs of salaries and bills of up to £1.2m to support small and medium sized businesses.
- Time to Pay Arrangements – HMRC will dedicate 2,000 new call handlers who will assist with those struggling to pay their tax liabilities, as well as the possibility of waiving late payment penalties and interest – this will be vital in supporting cashflow and liquidity.
- Business rates for shops, cinemas, restaurants and music venues with rateable value below £51,000 will be removed for a year.
The government introduced a variety of new measures in the hope it will promote investment and new economic activity.
- Businesses eligible for the Small Business Rates relief can receive a £3,000 cash grant.
- Employment Allowance to increase from £3,000 to £4,000, with effect from April 2020.
- Rate of Research and Development expenditure credit to be increased from 12% to 13% from 1st April 2020.
- There is to be an extension of 100% capital allowances on zero emission vehicles to extend from April 2021 to April 2025. For a more in-depth review, please see our blog on Company Car Tax.
- Increase in Structures and Buildings Allowance to 3% – Allowance creates tax relief for those investing capital into non-residential structures/buildings which would not qualify for capital allowances.
- New Digital Service Tax (DST) will come into effect from 1 April 2020 as planned.
- The Corporation Tax Rate will remain at 19%.
Personal Taxation/National Insurance:
Few major changes have been made to the personal tax and national insurance regimes within the Budget this year, however some changes have been made to aid the cost of living for individuals.
- Increase in the National Insurance Contribution threshold for Class 1 Primary from £8,632 to £9,500 from the 6th of April 2020.
- Currently, an individual is able to obtain tax relief on pension contributions up to £40,000 each year. However, this can be tapered if certain income thresholds are met. The new budget means the ‘adjusted income’ and ‘threshold income’ thresholds are increased by £90,000. However, for individuals who earn over £300k the minimum level to which the annual allowance is tapered has been decreased from £10,000 to £4,000. This is a specialist area so please speak to us if you think it may be relevant.
- The Lifetime Allowance in which an individual can receive tax relief on pension contributions has been increased to £1,073,100.
- Top Slicing Relief – new measures allow an individual’s personal allowance to be used in the Top Slicing Relief calculation (as long as it has not been already offset against other income). Again, this is a specialist area so please talk to us if relevant to you.
- Employees who work from home will see an increase in the flat rate reduction from £4 a week to £6 from 6 April 2020 – this does not apply to employees who choose to work from home.
- Junior ISA annual limit will increase from £4,368 to £9,000 per year from 6 April 2020.
Capital Gains Tax:
- Increase in the capital gains tax annual exemption from £12,000 to £12,300 for individuals from the 6th April 2020. An increase will also be made for trusts from £6,000 to £6,150.
- Entrepreneur’s Relief – previously this relief provided qualifying disposals a decrease in Capital Gains Tax rate from 20% to 10%, for up to the first £10 million of gains (Lifetime Allowance). The new budget sees the Lifetime Allowance decrease to only £1 million, crucially this is immediate and effective from 11 March 2020.
- Disposal of Residential Properties – Decrease in final period of exemption from 18 months to 9 months (must have lived in property as Principal Private Residence at some point), and lettings relief is only allowed if the landlord lives in the property with the tenant.
One important new rule instated within the last year, which comes to effect from 6th April 2020, is the new 30-day rule on the disposal of residential properties. Disposals made before this date would see the tax payable on their tax return, which could be over a year after completion. New rules mean the Capital Gains Tax due would now be payable within 30 days of the completion date. You can read more about this here.
No changes were made to the inheritance tax regime.
VAT & other indirect taxes
- Plastics Packaging Tax – New tax will be introduced from April 2022 to tackle the waste of single-use plastic. A further consultation of the details and implementation of the tax will follow.
- VAT on digital publications to be scrapped from 1st December 2020. The hope is that the benefit will be passed onto consumers.
- VAT on women’s sanitary products to be scrapped from 1st January 2021.
- Postponement of import VAT – VAT registered businesses will now be able to include import VAT on the VAT return, rather than paying it at importation.
- Non-Resident companies with rental income will now be chargeable to UK Corporation Tax from April 2020.
- Non-Resident Buyers of residential property will see a surcharge of 2% in stamp duty and a further 3% on top if the buyer does not intend to live in the property. This will apply to properties in England and Northern Ireland and comes into effect from April 2021.
If you have any further queries regarding the Budget, please do not hesitate to contact us.