Budget 2020 – Key points

Dear Members,

Rishi Sunak delivers his first Budget as UK chancellor against the most uncertain economic backdrop since the financial crisis.

The chancellor’s first Budget was announced against a challenging economic background, made worse by the impact of the coronavirus. Unsurprisingly, the emphasis was on the government’s spending plans, as it sought to fulfil its election promises, to substantially increase infrastructure expenditure and to ameliorate the negative impact of the coronavirus. These announcements were supported by a package of measures from the Bank of England, including a cut in the base rate by half a percent to 0.25%.

An increase in the National Insurance primary threshold and lower profits limit to £9,500 (from £8,632) from 6th April 2020 will be welcomed by employees and the self-employed respectively. The Income Tax personal allowance remains at £12,500.
There was significant pre-Budget speculation around Entrepreneurs’ Relief, which grants a 10% tax rate on capital gains realised from the disposal of a qualifying interest in a qualifying business, up to a lifetime gains limit of £10 million. While the relief will remain, the lifetime limit will reduce to £1 million. The chancellor indicated that this should not materially reduce the incentive to start and build businesses.

Turning to investments, parents keen to make tax-efficient provision for their children will welcome the increase in the annual limit for Junior ISA subscriptions to £9,000 (from £4,368) for the 2020/21 tax year.  For investors, the main change of note was the increase in the annual Capital Gains Tax exemption to £12,300 (up from £12,000) for the next tax year. The (tax-free) dividend allowance remains at £2,000. Taken together, these reliefs increase the tax attractions of an investment in unit trusts, subject to appropriate limits.  

It was confirmed that the previously announced reduction in Corporation Tax to 17% would not be going ahead. The rate remains at 19%, which is still relatively low.

The tapered annual allowance for pensions has been a hot topic for high earners, especially members of the NHS Pension Scheme. We had expected the chancellor to increase the level at which the tapered allowance first applies, but not to the extent that he did. He increased the threshold and adjusted income levels by £90,000: meaning that no one with income under £200,000 will now be subject to the taper and will have a £40,000 annual allowance. However, it isn’t all good news: the minimum that the annual allowance can taper down to will now be £4,000 rather than £10,000. If you have previously ceased or reduced contributions to a pension scheme, this may mean there is now more scope to reconsider this decision. You should contact your Partner for more information.

Other highlights: 

  • All those advised to self-isolate will be entitled to statutory sick pay, even if they have not presented with symptoms
  • Self-employed workers who are not eligible will be able to claim contributory Employment Support Allowance
  • The ESA benefit will be available from day one, not after a week as now
  • Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks
  • Small firms will be able to access “business interruption” loans of up to £1.2m
  • Business rates in England will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000
  • Fuel duty to be frozen for the 10th consecutive year
  • Duties on spirits, beer, cider and wine to be frozen
  • Tobacco taxes will continue to rise by 2% above the rate of retail price inflation
  • Business rate discounts for pubs to rise from £1,000 to £5,000 this year
  • System of High Street business rates to be reviewed later this year
  • Firms eligible for small business rates relief will get £3,000 cash grant
  • VAT on digital publications, including newspapers, e-books and academic journals to be scrapped from December
  • Stamp duty surcharge for foreign buyers of properties in England and Northern Ireland to be levied at 2% from April 2021

Kind Regards, 

Yongyi Neathercoat
CDCOfficer@petworth.biz
01798 839094

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