Spring Budget 2020 – today’s headlines

11/03/2020

Chancellor Rishi Sunak’s budget 2020 had a very different feel to it than those of recent times. With the country facing challenges from the Covid-19 (Corona) virus and the recent floods, his statement focused on spending plans and infrastructure investments to support the health service and businesses.

Responding to the current and expected economic impact of the Corona virus, several funding measures were announced. These are designed to support the NHS and relieve the pressure on both small business owners and specific sectors. This included a temporary suspension of business rate charges for smaller retailers, hospitality and leisure businesses.

From a tax perspective, some of the key points that we feel may affect individuals and businesses from a tax planning perspective are summarised below.

Tax measures – key points

Entrepreneur’s Relief –   as anticipated, this has been restricted, but, thankfully for many, not abolished. From 11 March 2020, the reduced rate of capital gains tax of 10% will only apply to a maximum of £1 million of gains in a lifetime (previously £10 million).

Corporation tax – held at 19%, the planned reduction will not proceed.

National Insurance – the earnings threshold will increase from 6 April 2020 to £9,500 for employees and £8,788 for employers, reducing the amounts on which both individuals and employers pay National Insurance Contributions (NICs).

Employment Allowance – available for smaller business to use to reduce their national insurance liabilities, will increase from £3,000 to £4,000 with effect from 6 April 2020.

Savers – tax rates for savings (£5,000 @ 0% for lower earners) and the ISA savings limit (£20,000 pa) remain unchanged. Junior ISA ‘s and Child Trust Funds savings limits increased from £4,368 pa to £9,000 pa.

R & D (Research & Development) tax credit – the relief rate for qualifying projects will increase from 12% to 13% to encourage innovation.

Intangible assets – further reform will bring tax relief for the acquisition of corporate intangible assets under one regime from 1 July 2020.

Non-UK resident Stamp Duty Land Tax (SDLT) – there will be a 2% surcharge on residential property purchases made by non-UK residents from 1 April 2021.

Off payroll working rules – (‘IR 3’) will be implemented, as planned, with effect from 6 April 2020.

Capital Allowances – the annual rate of allowance on the cost of constructing new, or renovating old, non-residential buildings will increase from 2 to 3%.

Pensions relief – the annual allowance for tax relief on pension contributions is £40,000 per annum.  However, this level is reduced (‘tapered’) for higher earners.  From 6 April 2020, the taper will only apply to those with an annual income in excess of £200,000.  Only those with income over £300,000 will suffer the cap – the cap will reduce from £10,000 to £4,000.

Further information

Our extended budget report will be with you by the end of the week, when we have had more time to digest the detail.  If you have any concerns or questions about how the budget may impact your tax position in the meantime, please contact your usual WMT tax specialist or Anne-Maree Dunn.