Spring Budget 2020 – Tax Highlights
On 11 March 2020, Chancellor of the Exchequer Rishi Sunak announced a number of key spending pledges and tax changes. Here are some of the tax highlights:
- The personal allowance will remain at £12,500 in 2020/21. The basic rate band will also be frozen at £37,500, so individuals will typically be able to earn £50,000 before paying tax at the higher rate in 2020/21.
- The Primary Threshold and Lower Profit Limit for National Insurance Contributions (NICs) will increase from £8,632 to £9,500 from April 2020, benefiting employees and self-employed individuals.
- The flat rate deduction for working from home will increase from £4 to £6 per week.
- From April 2021, there will be National Insurance holiday for employers of veterans in their first year of civilian employment, exempting employers from paying secondary NICs on veterans’ salaries up to the Upper Earnings Limit for 12 months.
- In light of the recent First Tier Tribunal case Silver v HMRC, the government will legislate on how allowances and reliefs can be set against life insurance policy gains (for Top Slicing Relief) from 11 March 2020.
- Where a disposal qualifies for Entrepreneurs’ Relief, capital gains tax is payable at a rate of 10%. The lifetime limit for Entrepreneurs’ Relief will be reduced from £10m to £1m, effective from 11 March 2020.
- Off-payroll/IR35 changes for the private sector are to proceed as previously confirmed, putting the responsibility for compliance on the end client. This will increase the compliance obligations for businesses that engage with contract workers.
- The Employment Allowance will increase from £3,000 to £4,000 from April 2020, increasing the amount of wages/salaries that may be paid by employers before incurring secondary NICs charges.
- The annual Structures and Buildings Allowance for capital allowances is to increase from 2% to 3% (per year) from April 2020, providing relief to businesses investing in new, or renovating old, non-residential property which is used for qualifying purposes.
- There will be a consultation on Enterprise Management Incentives (EMI schemes) to ensure that it continues to provide support for high growth companies to recruit and retain talent.
- There is to be a consultation on whether expenditure on data and cloud computing, should continue to qualify for R&D tax credits.
- The PAYE cap on payable R&D tax credits for small and medium sized enterprises claiming R&D tax credits to be delayed to April 2021.
- Corporation tax is to remain at 19% from April 2020.
- There is a restriction on relief for companies for Intangible Fixed Assets (such as trademarks, patents, design rights) established before 2002. The restriction is to be removed, so that the tax relief for the cost of acquiring corporate intangible fixed assets after 1 July 2020 will be closer aligned with the non-corporate regime.
- Currently individuals who earn below the personal allowance (and may not pay income tax), can receive a basic rate top up on their private pension contributions from the government. There is to be a call for evidence on whether a basic rate tax credit should be available to such individuals going forward.
- There will be an increase in the two pensions tapered annual allowance thresholds by £90,000 each from 2020/21. In effect this will mean that the £40,000 annual pensions allowance will only begin to taper where adjusted income exceeds £240,000 (rather than £150,000).
- The minimum tapered annual allowance will reduce from £10,000 to £4,000 from April 2020 (affecting individuals with adjusted income over £300,000).
- The lifetime allowance for pensions will increase to £1,073,100 in line with CPI.
Stamp Duty, Stamp Duty Land Tax (“SDLT”), & VAT
- A targeted market value rule was introduced for Stamp Duty and Stamp Duty Reserve Tax in Finance Act 2018-19 on share acquisitions, when listed shares are transferred to a connected company. This rule is to be extended to unlisted shares, prevent tax avoidance. Legislation will be amended to prevent a double tax charge.
- From 1 April 2020/21, there will be a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland.
- The previously delayed VAT domestic reverse charge is to go ahead as planned from 1 October 2020, for individuals/businesses working in the construction industry.
- From April 2021, the benefit in kind for zero emission company vans will be £nil.
- From April 2021, first year allowances will be extended for zero emission vehicles. For vehicles with emissions up to 50g/km, the 18% main rate writing down allowance will apply. The 6% special rate will apply to cars with emissions over 50g/km.
- There is to be an increase in the Research and Development Expenditure Credit (RDEC) from 12% to 13% for large businesses investing in R&D.
- A 2% digital services tax on revenues of certain digital businesses (e.g. search engines, social media platforms, online marketplaces) was announced in the previous budget and will apply as planned from 1 April 2020. This is to ensure that the tax paid in the UK reflects the value these businesses derive from their interactions with, and the contributions of, an active user base.
- As announced in the previous budget, from 1 April 2020, the proportion of capital gains that can be relieved by brought-forward capital losses will be restricted to 50% for large companies (subject to a £5m allowance).
Budget 2018: Entrepreneurs’ Relief & Alphabet Shares (28 November 2018)
Budget 2018 – Spotlight on Charity Tax (16 November 2018)
Trick or Treat? Tax Highlights from Budget 2018 (29 October 2018)