- Written by Super User
The Budget 2020 – The details you need to know
The vast majority of 2019 saw a concentrated effort in detailing with the economic future for the UK becoming independent of the European Union.
However, this has been overshadowed by the more recent and more immediate threat of the Covid-19 Coronavirus, which impacts each and everyone of us, in all business sectors across the country.
The newly appointed Chancellor, Rishi Sunak, made it clear that the UK Government would do ‘whatever it takes to support the significant impact on the UK economy’.
Below is a summary of the key points announced by the Chancellor in the 2020 Budget on Wednesday 11 March 2020.
Corporation tax rates
The main rate of corporation tax is 19%. The Summer Budget of 2017 saw the announcement of a reduction in Corporation Tax rates to 17% for financial years commencing 1 April 2020. However, as detailed in the Prime Ministers pre-election speech, the Chancellor has announced a change, advising the rate will remain at 19%.
Research and Development (R&D) tax relief
The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.
The announcement made in the Budget 2018 that from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year, has been delayed until The government has now announced the implementation of the restriction will be delayed to 1 April 2021.
Capital Allowances: Structures and Buildings Allowance
The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
First year allowances for business cars from April 2021
The government has announced the following rates:
The 100% FYA will only apply to zero emissions cars.
The 18% rate will apply to cars with CO2 between 1 and 50g/km.
The 6% will apply to cars with CO2 emissions above 50g/km.
From April 2021, there will be a NIL rate of tax applied to zero-emission vans within the van benefit charge.
The government has announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England, to include cinemas and music venues will be increased to 100% and expanded to include hospitality and leisure businesses.
The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19 the discount for pubs will be increased to £5,000.
Grants of £3,000 grant for the smallest businesses that are eligible for the small business rates relief or rural rate relief. This has been increased to £10,000
Statutory Sick Pay
The government will support small and medium-sized businesses and employers to cope with the extra costs of paying SSP related to the coronavirus, by refunding eligible SSP costs. The eligibility criteria for the scheme include:
the refund will be limited to two weeks per employee
employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria)
employers should maintain records of staff absences, but should not require employees to provide a fit note from their GP
employees will, from 13 March, be able to receive SSP from the first day they are self-isolating and not working
National Insurance thresholds
The government has recently announced National Insurance thresholds for 2020/21. Two thresholds, will rise by 10% from £8,632 to £9,500:
the primary threshold – which sets the level at which employees start to pay Class 1 National Insurance contributions (NICs)
the lower profits limit – which sets the level at which the self-employed start to pay Class 4 NICs.
The upper thresholds which apply to these two classes of NICs remain at £50,000.
The employment allowance provides employers with relief from their obligation to pay employers NIC.
From 6 April 2020, employers whose NIC bill was below £100,000 in the previous tax year will receive an allowance of £4,000, increased from £3,000.
National Minimum wage
From 6 Aril 2020 these are increased from 1 April 2020:
£8.72 for over 25 year olds
£8.20 for 21 to 24 year olds
£6.45 for 18-20 year olds
£4.55 for under 18’s
£4.15 for apprentices under 19 and for those over 19, but in their first year
The government have announced an increase in the maximum flat rate income tax deduction for homeworkers. To cover the additional cost of household expenses for homeworkers the rate, from April 2020, has increased from £4 to £6 per week.
Off payroll working practices, more commonly know as IR35, will be introduced into the private sector with effect from April 2020 and applies to payments and services supplied on or after 6 April 2020.
The scheme is aimed at individuals (the worker) providing their services through an intermediary (a personal service company) to another person or entity (the client). It is the client’s responsibility to determine the workers status. The determination could mean that the fee payer may need to deduct PAYE and NI and pay over any employers NIC.
Due to the outbreak of Coronavirus this measure has now been delayed until April 2021.
Capital gains tax rates
CGT annual exemption
The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.
Entrepreneurs’ Relief (ER)
The previous annual £10 million lifetime allowance will be reduced to £1 million for ER qualifying disposals made on or after 11 March 2020.
There are special provisions for disposals entered into before 11 March 2020 that have not been completed
Payments on account and 30 day disclosure
From 6 April 2020, when a UK resident disposes of UK land and residential property, a CGT return will need to be submitted to HMRC within 30 days of the completion of the disposal, and the full liability will be payable within that same 30 day window.:
The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.
Stamp Duty Land Tax (SDLT) surcharge
A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.
Inheritance tax (IHT) nil rate bands
The nil rate band has been frozen at £325,000 since April 2009 and this is planned to remain at this amount until April 2021. The ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.
The personal allowance
The personal allowance is currently £12,500 and will remain at this level for 2020/21. The personal allowance is reduced for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000.
Therefore, for those whose net adjusted profit exceeds £125,000, there will be no personal tax allowance.
Tax bands and rates
The basic rate of tax is 20%.
In 2019/20 and 2020/21 the band of income taxable at this rate is £37,500.
Income of £37,501 to £150,000 will be taxed at 40%
Individuals pay tax at 45% on their income over £150,000.
Tax on savings income
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income less allocated allowances and reliefs) exceeds £5,000.
Tax on dividends
The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:
7.5% for basic rate taxpayers
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.
The pensions annual allowance (currently £40,000) is the maximum amount of tax-relieved pension savings that can be accrued in a year. However, for those on higher incomes, the annual allowance is reduced by £1 for every £2 that an individual’s ‘adjusted income’ exceeds £150,000, to a minimum annual allowance of £10,000. Adjusted income is broadly net income before tax with the addition of any pension accrual. The taper potentially applies to an individual with income before tax, without the addition of the pension accrual, above £110,000. This is known as the ‘threshold income’.
Adjusted income and threshold income will each be raised by £90,000 for 2020/21. The threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will begin to taper down for individuals who also have an adjusted income above £240,000.
There is also a change to the minimum annual allowance. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from 6 April 2020. This reduction will only affect individuals with threshold income over £300,000.
The Spirare Team value each an everyone of our clients, old, new and those of the future. We are taking steps to ensure the safety of the team, clients and the local community during this time.
We are, as always, committed to assisting you and as a precaution we are taking the necessary steps and following guidelines to administer homeworking. All staff will have access to their email, so we can stay in touch.
If you wish to discuss the above, please contact us.