Budget 2020

The Budget was delivered on 11 March 2020 by Rishi Sunak, his first since being appointed as Chancellor.

Overall, this budget seems to be the lightest in a long while regarding changes to tax law, although there are some key ones in respect of ER.

We have set out below a list of the notable changes from yesterday’s budget. These are generally applicable from April 2020, unless otherwise noted:

Key points of Budget 2020

Entrepreneurs’ Relief (ER) – ER is available on qualifying Capital Gains subject to a lifetime limit. This limit has been reduced from £10m to £1m for disposals with effect from 11 March.
Pensions tax – Individuals are able to contribute up to £40,000 per tax year into a pension without incurring any tax charges, however this limit is reduced if the individual is a ‘high earner’. To be treated as a high earner, an individual had to have Threshold Income of above £110,000 and Adjusted Income of above £150,000. These thresholds have been increased to £200,000 and £240,000 respectfully, so fewer individuals will be subject to a reduction in the amount they can contribute. The maximum reduction in the contribution limit has increased from £30,000 to £36,000, so some higher earners will now be limited to £4,000 tax free contributions.
Research and Development (R&D) - Large companies undertaking qualifying R&D activities can claim an additional tax relief based on their qualifying R&D expenditure. This rate has been increased from 12% to 13%. The higher rate available to SMEs remains unchanged.
National Insurance (NI) – There has been an increase in the income at which employees and the self-employed start to pay NI from £8,632 to £9,500. Employers’ contributions previously started at the same level, but will now start at £8,788 (a simple inflationary increase).
National Insurance (NI) - Certain smaller employers can claim a reduction in employer’s NI contributions. This reduction will be increased from £3,000 to £4,000.
Capital Allowances (CAs) – Ordinarily, CAs cannot be claimed on structures and buildings, however a new relief was introduced in October 2018 allowing a 2% tax deduction for new commercial buildings. This rate will be increased from 2% to 3%.
Capital Allowances (CAs) – Businesses that purchase cars can claim CAs on the cost of the vehicle and the rate at which they can claim is determined by the vehicle’s CO₂ emissions. New lower thresholds to qualify for the different levels of CAs will apply from April 2021. The CO₂ level for 100% CAs in the year of acquisition drops to 0g/km (from 50) and for the main rate of CAs drops to 50g/km (from 110), other vehicles will continue to be eligible for CAs at the lower “special rate”.
Property taxes – Stamp Duty Land Tax (SDLT) is payable on the purchase of property in England and Northern Ireland. From 1 April 2021, an SDLT surcharge of 2% will apply to non-residents purchasing residential property.
EMI schemes - although no changes were made, it has been announced that a consultation will be made in respect of EMI schemes. Watch this space.

In addition to the above, there are a couple of changes to UK taxation which have been previously announced but take effect from next month. The key changes are as follows:

Other upcoming changes to UK Taxes

Off-payroll workers – Changes come into effect from 1 April 2020 which shift the onus of determining the taxation status of a worker working through certain structures from the worker to the work provider. Our earlier blogs detail how this affects the work provider and how it affects the contractor.
Capital Gains Tax – a number of changes come into effect from 6 April 2020 including a new 30 day tax payment deadline for residential property disposals, and reductions in reliefs available for properties that were at one point used as a principal private residence.

Finally, although there were no real announcements in respect of to IHT or restrictions to pensions relief (as was tipped to be the case), it may be that further announcements on these will come in the future. We urge taxpayers to take action now whilst valuable IHT and pensions reliefs are still available.

Our team have analysed this year's Budget announcements, and our analysis can be seen here and in our separate blog.

In addition, we are hosting a series of subject specific tax update events over the course of the year. Tax affects us all, so whatever your circumstances, one of our events might interest you.

If you would like to discuss the above in more detail, or look into how your business could save corporation tax, then why not drop us a line today to see how our tax team can help your business thrive.