2020 Budget Analysis 12 March 2020
Introduction First budget since Oct 2018 - New Chancellor looking to make his mark - Next Budget November 2020 - Did he ‘Get It Done’?!! -
Coronavirus Response fund - initially set at £5 billion • SSP from day 1 for self isolators • • NHS 111 fit note provision. Valid evidence Self employed – removal of lower earnings • limit for Universal Credit or Contributory Employment & Support Allowance • Business rates retail discount 100% extends to leisure & hospitality sector for 1 year
Coronavirus Pubs rates relief £5,000 • Those covered by Small Business Rates • Relief £3,000 one off grant • Temporary business interruption loan scheme. Funding up to £1.2m HMRC time to pay… 2,000 experienced call • handlers!
Entrepreneurs’ Relief (ER) Why under the spotlight? - Lifetime limit reduced from £10m to £1m - With immediate effect from 11 March 2020 - Anti-forestalling provisions also included with - retrospective impact
ER - Anti-forestalling provisions Aimed at attacking pre Budget action designed to ‘lock in’ ER on lifetime • limit of £10 million • Designed to capture transactions in 2019/20 executed before Budget day where further action required • Areas of anti-forestalling: Manipulation of unconditional contracts - Share for share/loan note exchanges - • Effectively retrospective legislation!!!
Pensions 2019/20 2020/21 Annual allowance 40,000 40,000 Lifetime allowance 1,055,000 1,073,100 Tapering Adjusted income 150,000 240,000 Threshold income 110,000 200,000 Minimum annual allowance 10,000 4,000 Money purchase annual allowance 4,000 4,000 *Max contribution once adjusted income hits £312,000 is £4,000
Income Tax Rates Dividend tax 2019/20 2020/21 Tax rate rate Personal allowance 12,500 12,500 0% 0% Basic rate band 37,500 37,500 20% 7.5% Higher rate threshold 50,000 50,000 40% 32.5% Additional rate threshold 150,000 150,000 45% 38.1%
Savings Allowance 2019/20 2020/21 Basic rate taxpayers 1,000 1,000 Higher rate taxpayers 500 500 Additional rate taxpayers 0 0
Starting rate for savings income 2019/20 2020/21 Starting rate for savings 0% 0% Starting rate limit for savings 5,000 5,000
Tax free dividends – regardless of level of income − 2017/18 £5,000 − 2018/19 £2,000 Dividend 2019/20 £2,000 − 2020/21 £2,000 − allowance
2019/20 2020/21 Eldest/only child £20.70 £21.05 Other children £13.70 £13.95 Child benefit A tax charge of High Income Child Benefit remains when a member of the household’s income exceeds £50,000.
2019/20 £100,000 − − 2020/21 £100,000 Income limit Withdrawal at £1 for every £2 by which income exceeds £100,000 for personal No personal allowance where income exceeds allowance − 2019/20 £125,000 − 2020/21 £125,000
National insurance Employee’s National insurance 2019/20 2020/21 Primary threshold 8,632 9,500 Upper limit 50,000 50,000 Employees rates up 12% 12% to/above upper limit 2% 2% 9% 9% Self employed 2% 2% For an employee earning over £9,500 this represents an NI saving of £104 for the year 2020/21
National insurance Employer’s National insurance Class 1 Secondary NIC – on salary 2019/20 2020/21 Secondary threshold 8,632 8,788 Employers rate above 13.8% 13.8% secondary threshold Employment allowance 2019/20 2020/21 Employment allowance £3,000 £4,000 Class 1A NIC – on benefits and expenses 2019/20 2020/21 Employer rate 13.8% 13.8%
Capital gains tax (CGT) 2019/20 2020/21 Annual exemption £12,000 £12,300 Basic rate – except residential property 10% 10% Basic rate – residential (other than exempt main residence) 18% 18% Higher rate – except residential property 20% 20% Higher rate – residential (other than exempt main residence) 28% 28%
Residential property − CGT payable within 30 days of completion coming in from April 2020 − 30 day rule already applies to non-residents (penalties!) Capital gains HMRC do impose these PPR reduce to 9 months from 18 months from 6 April 2020 − tax − Letting relief reform − From 6 April 2020 will only apply where the owner of the property is in shared occupancy with the tenant
Stamp Duty Land Tax − Recap: 3% on second residential property or if bought by a limited company − Additional 2% for non UK resident purchasers of residential property from 1 April 2021
Inheritance tax rates 2019/20 2020/21 Rates for estates 40% 40% Inheritance Reduced rate (for estates leaving 10% or 36% 36% more to charity) tax Rate (for chargeable lifetime transfers) 20% 20%
Inheritance tax rate bands Inheritance tax Residence nil (40% above nil rate Nil rate band Total rate band* band( Inheritance 2017/18 325,000 100,000 425,000 2018/19 325,000 125,000 450,000 tax 2019/20 325,000 150,000 475,000 2020/21 325,000 175,000 500,000 * Restricted for estates over £2 million before reliefs
Tax free savings accounts 2019/20 2020/21 £20,000 of £20,000 of Individual savings which £4,000 which £4,000 account (ISA) can be saved can be saved subscription limit into a Lifetime into a Lifetime ISA ISA Junior ISA £4,368 £9,000 subscription limit Child trust fund £4,368 £9,000 subscription limit
Car/ Van Benefits Car benefits - Diesel supplement kept at 4% - No income tax or national insurance for provision of - charging facilities for electric or hybrid vehicles at or near the workplace for own vehicles Car fuel - £24,100 multiplier up to £24,500 - Van benefit - £3,430 rises to £3,490 - Van fuel scale charge up from £655 to £666 -
Car benefit Cars registered before 6 April 2020 CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22 0 N/A 16% 0% 1% 1-50 >130 16% 2% 2% 1-50 70-129 16% 5% 5% 1-50 40-69 16% 8% 8% 1-50 30-39 16% 12% 12% 1-50 <50 16% 14% 14% 51-54 19% 15% 14% 55-59 19% 16% 16% 60-64 19% 17% 17% 65-69 19% 18% 18% 70-74 19% 19% 19% 75-79 22% 20% 20% The percentage increases 1% for every 5 g/km increase up to the maximum 37%. Add 4% for diesels up to a maximum of 37%. The 4% supplement for diesel plug-in hybrids does not apply.
Car benefit Cars registered on or after 6 April 2020 CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22 0 N/A 16% 0% 1% 1-50 >130 16% 0% 1% 1-50 70-129 16% 3% 4% 1-50 40-69 16% 6% 7% 1-50 30-39 16% 10% 11% 1-50 <50 16% 12% 13% 51-54 19% 13% 14% 55-59 19% 14% 15% 60-64 19% 15% 16% 65-69 19% 16% 17% 70-74 19% 17% 18% 75-79 22% 18% 19% The percentage increases 1% for every 5 g/km increase up to the maximum 37%. Add 4% for diesels up to a maximum of 37%. The 4% supplement for diesel plug-in hybrids does not apply.
National minimum wage 2019/20 2020/21 Apprentices £3.90 £4.15 16-17 year olds £4.35 £4.55 18-20 year olds £6.15 £6.45 21-24 year olds £7.70 £8.20 National living wage 25+* £8.21 £8.72 * By 2024 national living wage to rise to £10.50
Business tax
Corporate tax rates Period Rate 1 April 2018 – 31 March 2019 19% 1 April 2019 – 31 March 2020 19% 1 April 2020 – 31 March 2021 17% 1 April 2020 – 31 March 2021 19%
R&D expenditure credit (large companies) − Rate 13% on expenditure incurred on or after 1 April 2020 (12% in 2019/20) − Effective rate of tax relief = 10.53% (up from 9.72% in R&D tax 2019/20) Example of £100,000 spend 2019/20 2020/21 relief - RDEC Tax credit 12%/13% x £100,000 12,000 13,000 Less CT on tax credit (2,280) (2,470) Additional tax relief 9,720 10,530
Large company − More than 500 employees and More than €100 million turnover or − R&D tax More than €86 million gross assets − relief - RDEC − Including all group companies, UK & overseas
R&D relief – SMEs − No change – 130% enhancement − − Effective rate of tax relief = 43.7% − Tax Credit for loss at 14.5% (Restriction of 3 x PAYE/NI bill R&D tax deferred 12 months until 1 April 2021) relief Example of £100,000 spend £ Tax relief (as normal) @ 19% 19,000 Enhancement £130,000@ 19% 24,700 Total tax relief 43,700
Capital allowances for structures and buildings New structures and buildings allowance - 3% (from 2% in 2019/20) per year on - cost, straight line No clawback on sale of building, new - owner takes over the pool Build cost of any commercial buildings, - excluding land Renovations/improvements/extensions - qualify
Off payroll workers (IR35) Changes from 6 April 2020, as previously announced. Payments to intermediaries (companies / agencies) for worker’s personal services Obligation to deduct PAYE/NIC from payments relating to “deemed” employees Exception for payments by small companies
Tiny Relaxation on the rules: Corporation Tax relief – normally on - amortisation as charged in P&L Intangible Previously not available for intangibles - created on or before 1 April 2002 and Fixed Assets acquired from related parties CT relief available for acquisitions on or after - 1 July 2020 Restrictions still apply to goodwill -
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