Chancellor Rishi Sunak delivered his first budget yesterday (11th March) after only being in the post for a few weeks. The budget saw some brave radical changes with a highlight on how the government would react financially to the COVID -19 position.
It was a Budget that felt like it had lots of giveaways, particularly for small businesses. However, taking away any changes that are specific to COVID-19, many of the other positive aspects did not require significant, immediate government spending or benefits received by small businesses.
Having now digested the budget documents here is a summary of the main tax announcements. Let's dig in:
Headline changes
Entrepreneurs’ Relief provides a lower rate of CGT (10%) to be paid when certain criteria are met. For example, when disposing of all or part of a business. For disposals made on or after 11 March 2020, the lifetime limit of gains that can qualify for this lower rate will be reduced from £10 million to £1 million
For this year, business rates in England will be abolished for eligible businesses in the retail, leisure and hospitality sectors with a rateable value below £51,000
Also for this year, a £3,000 cash grant per business that is currently eligible for the small business rates relief, as well as an increase in the business rate discount for pubs from £1,000 to £5,000
Increasing the rate of Research & Development Expenditure Credit from 12% to 13%.
An increase in the NIC Employment Allowance, from £3,000 to £4,000 - effective from April 2020 - plus an increase in the NIC threshold to £9,500 for employees
Small firms will be able to access ‘business interruption’ loans, up to £1.2million
Increase in capital allowances – structures and buildings allowance – from 2% to 3% per annum
VAT on digital publications being abolished from 1 December 2020
Continued focus on aggressive tax avoidance
Improved ‘Time to Pay’ arrangements to help taxpayers affected by COVID-19
Income Tax
No change in personal or trust tax rates
The personal allowance will remain at £12,500 for 2020/21
The basic rate tax band will also remain constant at £37,500. Therefore, you will become a higher rate taxpayer if your income exceeds £50,000
When taxpayers realise gains on life insurance policies, they may be able to qualify for a relief known as top slicing relief. Legislation will be introduced to reinstate the personal allowance into the calculation for top slicing relief and this should, in many cases, result in the tax charge on the surrender of a life insurance policy being reduced
Capital Gains Tax (CGT)
No changes in the rates of CGT
For 2020/21, the annual exemption will be £12,300 for individuals and £6,150 for trustees
Entrepreneurs’ Relief - changes as detailed above
As previously announced, CGT arising on the disposal of UK residential property on or after 6 April 2020 will have to be paid within 30 days, and a land return will also have to be submitted within the same 30 days
Inheritance Tax (IHT)
There were no announcements regarding IHT
The nil rate band remains at £325,000
The residence nil rate band will increase to £175,000 from 6 April 2020
Pensions
From 6 April 2020, the tapering of the pension annual allowance will only occur when adjusted income is above £240,000 (previously £150,000) and threshold income is above £200,000 (previously £110,000). Therefore, more taxpayers should be able to access the full annual allowance of £40,000
From 6 April 2020, and for those with adjusted income above £240,000, the annual allowance will be reduced by £1 for every £2 in excess of this threshold subject to a minimum annual allowance of £4,000
Stamp Duty Land Tax (SDLT)
SDLT will increase for non-residents buying UK residential property. But there are no changes to the current rules and rates for UK residents
Other announcements
From 6 April 2020 the threshold above which an individual starts to pay National Insurance Contributions will increase from £8,632 to £9,500
Corporation tax rate to remain at 19% for at least the next two financial years
ISA limit will remain at £20,000
The Junior ISA and Child Trust Fund annual limit will increase from £4,368 to £9,000 from 6 April 2020
Summary of 2020/21 personal tax allowances and rates
*subject to tapering if your income exceeds £100,000
** subject to tapering if your adjusted income exceeds £240,000 and your threshold income exceeds £200,000
We hope you find the above summary helpful and please let us know if you would like to discuss any points in further detail.
For further guidance specific to your own circumstances, we recommend meeting with an accountant. For more information and advice, get in touch with Catherine today. Give her a call on 01423 431889 or email catherine@bctaccountants.co.uk.