Lead Forencsices

Posted by James Pearson on 13 Mar 2020

Budget 2020 Highlights

On 11 March 2020, the new Chancellor outlined his first budget. The detailed budget documents set out the following notable tax changes:

Personal

  • Increase in the thresholds at which employees and the self-employed start paying National Insurance contributions (NICs) to £9,500 from April 2020. (Not employer’s NIC threshold)
  • IR35 reform confirmed as being legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.
  • To support the delivery of public services, particularly in the NHS, the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the “threshold income” will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.

Businesses

  • Structures and buildings allowance (SBA) rate – The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
  • NIC Employer’s allowance increased from £3k to £4k.
  • From 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) will be reduced from £10 million to £1 million.
  • Research & Development Expenditure Credit (RDEC) rate – The rate of RDEC (Large Company Scheme) will increase from 12% to 13% from 1 April 2020.
  • The introduction of the PAYE cap on the payable tax credit in the R&D schemes for small and medium-sized companies will be delayed until 1 April 2021.

Companies

  • Corporation tax is remaining at 19% from April 2020 (not reducing to 17%, as previously announced).
  • From 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%. This measure includes an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be unaffected.
  • As set out in July 2019,24 the government will reduce most CCT (Company Car Tax) rates by 2% in 2020-21 for cars first registered from 6 April 2020. Rates will return to planned levels over the following two years, increasing by 1% in 2021-22 and 1% in 2022-23. Rates will then be frozen until 2024-25.
  • From April 2021, the government will extend first year allowances to zero emission vehicles only and apply the main rate writing down allowance (WDA) of 18% to cars with emissions up to 50g/km. The special rate WDA of 6% will apply to higher polluting cars with emissions above 50g/km. First year allowances for zero emission goods vehicles and natural gas and hydrogen refuelling equipment will also be extended.

Stamp Taxes

  • The targeted market value rule to prevent artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company is being extended to unlisted shares in Finance Bill 2020 to prevent further tax avoidance.
  • The government will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.

VAT

  • The Government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020.
  • From 1 January 2021, the government will use freedom from EU law to enable a zero rate of VAT to be charged on women’s sanitary products.

Other Tax Points

  • The Budget confirms the government’s response to Sir Amyas Morse’s Independent Loan Charge Review31 and sets out the Exchequer costs of accepting the recommendations. These will be legislated for in the forthcoming Finance Bill.

 

There are plenty more changes set out in the Budget, including the annual updates to rates and thresholds. The full range of budget documents can be found here. If you would like any advice regarding the 2020 budget or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.