Our guide to Budget 2020 provides a clear and concise commentary of the main Budget topics, focusing on the issues pertinent to our clients, their families and their businesses.
The new Chancellor of the Exchequer, Rishi Sunak, delivered his very first Budget to parliament yesterday, amid the backdrop of a growing threat to the economy from the global outbreak of coronavirus (COVID-19) – this Budget he announced aims to bring ‘stability and security’.
Sunak conceded that COVID-19 offers challenges that will be “tough” and “significant” but reminded us that life will return to normal. He confirmed exactly what you would expect the UK Government to be doing for its citizens; adding “we are doing everything we can to keep this country, and our people, healthy and financially secure.”
Alongside a £30 billion package of emergency measures to mitigate the short-term economic impact of COVID-19, the Government announced major investment plans as it formalised promises to ‘level up’ the country.
Changes to Personal Finance and Taxation:
Fantastic news for a large segment of boosst clients is a change to the Pension Annual Allowance, which will still taper but the reduction now only impacts those earning more than £200,000, representing a significant increase from the previous threshold of £110,000.
There is also positive news for parents & grandparents who wish to build savings for their children tax-free, as the Junior ISA benefitted from a major increase to the annual contribution limit from £4,368pa to £9,000pa. The annual contribution limit for ‘adult’ ISAs remains at £20,000pa per person.
A negative for business owners looking to sell their business is a reduction of the lifetime limit for Entrepreneurs Relief from £10 million to £1 million, which has come into immediate effect. When this headline is considered in isolation, it appears to be terrible news however this relief was widely expected to be entirely abolished. The UK still retains a very low rate of tax for business sale proceeds compared to other developed nations.
The argument for owning an electric car is now even more compelling than ever, for both business owners and employees. With a benefit-in-kind tax charge of 0% confirmed for two years, electric company cars will certainly be on the rise. An extension to the ‘100% Capital Allowance’ rule, which means that a business can purchase an electric car as a 100% tax-deductible expense in year 1, is also a huge positive. Electric Cars are also now exempt from the VED car tax, which targets all cars bought for more than £40,000; saving buyers £320 at the point of purchase.
The Chancellor also confirmed a change to National Insurance contributions thresholds which will save employees earning more than £9,500pa around £85pa.
There was little change for employers and corporate tax. Corporation tax stays at 19%, and the R&D expenditure credit rate increases by 1%. IR35 and the Digital Services Tax were both confirmed as going ahead in April as expected.
There are clearly uncertainties that remain about the full impact of COVID-19 and how this could affect longer-term tax and spending decisions. As we head towards the end of the Brexit transition period, there is also a requirement for businesses to plan for the issues required to trade with the EU on 1 January 2021.