The following notes are not intended to be a comprehensive narrative on all of the Budget announcements, rather a summary of the items that we believe may be of value to clients.
Please do let us know if you require any clarification or if there are any items that you feel we may have overlooked.
For a full report on all of the Budget announcements you can visit the HMRC notes.
Emergency Measures – Covid-19
A number of support measures were announced, to help businesses in the event of a downturn in economic activity as a result of the spread of the Covid-19 virus (C19).
- SSP – In the event of a C19 diagnosis or if an employee is unable to work because of Government advice, then Statutory Sick Pay (SSP) (£94.25 per week) to be paid by the employer from day 1. Unlike normal SSP, C19 SSP can be recovered by the employer from the Government.
- Business rates – For most small businesses with premises where the total rateable value is less than £51,000 a one year 100% business rates discount announces. These businesses also eligible for a one-off £3,000 grant.
- C19 Business interruption loan scheme – The Chancellor has said ‘to be available in a matter of weeks’. Government willing to provide up to 80% guarantees to banks against overdrafts and loans granted to businesses. The loans to be required to support businesses suffering cash flow difficulties as a result of a downturn in the level of activity.
- Increased support for time to pay arrangements – HMRC to take a more supportive approach to requests by taxpayers to spread the payment of tax liabilities.
Entrepreneurs’ Relief
As feared, the Chancellor has reduced (with immediate effect) the limit for the relief from £10m down to £1m.
Therefore, clients generating Capital Gains on the sale or liquidation of their trading companies will pay Capital Gains Tax at 20% (rather than 10%) on any gain over £1m.
Personal Rates & Allowances
The Capital Gains Tax annual exemption for individuals has been increased to £12,300 for the 2020/21 tax year, from £12,000. For Trusts, the allowance is increased to £6,150.
No changes to the main Income Tax allowances and rates.
No change to National Insurance rates and upper limits. Some increase in the lower limits at which NIC contributions start to be charged.
See the HMRC summary of all rates & allowances
Pension Tax Relief
There had been concern that steps may have been announced in the budget to reduce the level of tax relief available to higher rate taxpayers. No such changes were announced. The only change announced in fact benefits higher rate tax in that the income limit (the point at which the £40,000 annual pension contributions limit starts to be tapered down) has been increased from £110,000 to £200,000.
The lifetime allowance for pension contributions has again been increased in line with inflation and now stands at £1,073,100 for 2020/21.
IR35
No relief announced from the rules coming into effect in April 2020, so large and medium sized companies will start enacting the rules from the start of next month.
See HMRC for current IR35 rules.
Corporation Tax
The rate of Corporation Tax remains unchanged at 19% for 2020/21 and 2021/21.
No changes in rates for capital allowances. The Annual Investment Allowance (on which 100% capital allowance available) remains unchanged at £1m.
ISA Limits
The annual adult ISA subscription limit remains unchanged at £20,000.
The junior ISA limit has been increased to £9,000.
Home Working Allowance
The maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 to £6 per week.
Employment Allowance
The annual employers’ National Insurance saving is increased from £3,000 to £4,000 per annum.
Inheritance Tax
No changes to rates, allowances or rules announced.
VAT
The 20% & 5% rates of tax remain unchanged, as do the registration and deregistration limits at £85,000 & £83,00 per annum respectively.
