In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.
Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.
Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below.
Personal Tax and miscellaneous matters
Statutory Sick Pay (SSP)
SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.
Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.
Local Authority Hardship Fund
Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.
Most of this funding will probably support the extension of council tax relief.
Personal Tax allowance
The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500).
Income Tax bands, rates and the dividend allowance
The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:
- Basic rate band £37,500 (2019-20 £37,500)
- Higher rate band £37,501 to £150,000 (2019-20 £37,501 to £150,000)
- Additional rate, no change, applies to income of more than £150,000.
Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income
Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.
Earlier payments of Capital Gains Tax (CGT)
As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.
The changes have applied from April 2019 for non-UK residents.
Capital Gains Tax Private Residence Relief changes
From April 2020, the government is making two changes to the private residence relief:
- The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
- Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.
CGT Entrepreneurs’ relief
One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.
Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.
Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.
CGT annual allowance
The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).
The equivalent allowance for trustees is £6,150 (£6,000 2019-20).
Tax benefit charges for low CO2 vehicles
In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).
Tobacco Duty Rates
All tobacco products will see an increase in duty by 2% above the current rate of inflation.
Hand-rolling tobacco will see an increase of 6% above the rate of inflation.
These changes will impact prices from 6pm, 11 March 2020.
Vehicle Excise Duty
Rates are due to be increased in line with the Retail Prices Index from April 2020.
Is frozen for another year.
Alcohol duty rates
Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.
ISA limits 2020-21
Adult savings limits remain unchanged at £20,000.
Junior ISA limits are increased to £9,000.
Zero-rating of VAT for women’s sanitary products
This measure is to be introduced from 1 January 2021.
Bank support from mortgage lenders
Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.
Banks are also considering increasing credit card limits and cash withdrawal limits.
Business Tax changes
It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.
Relief for Statutory Sick Pay payments
Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.
Watch this space as this is a welcome cost saver for smaller businesses.
Business Rates Retail Discount Scheme
The government has already 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 will increase from one third to 50% and will be expanded to include cinemas and music venues.
To support small businesses, in response to COVID-19, the retail discount 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 will be increased to £5,000.
Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.
One-off grant for small businesses
The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.
Businesses that think they may be eligible should contact their local authority.
Coronavirus Business Interruption Loan Scheme
The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.
Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.
HMRC’s Time To Pay Scheme
HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.
The previously announced reduction in Corporation Tax from 19% to 17% - from April 2020 - has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.
Structures and Buildings allowance
The annual writing down rate is to be increased from 2% to 3% from April 2020.
Digital Services Tax
Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.
This will be a major revenue raiser for HMRC.
Capital loss restriction from 1 April 2020
For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.
The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.
Car and van benefits charges
Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.
R&D expenditure credit
This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.
Zero-rating of e-publications
From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.
VAT reverse-charge for the construction sector
A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.
Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.
VAT registration threshold – no change
The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.
Clamp-down on tax evaders
As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.
Bank support for small businesses
In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms.
The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals.
The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.