On 11th March 2020 the Chancellor Rishi Sunak delivered government’s budget. In this article we outline some of the most important uptakes in the budget announcement.
As part of the budget the government announced measures to help businesses and employees get throughout the coronavirus outbreak (COVID-19). Please see our earlier article here for more information on how government plans to support businesses and employees.
On the same day as the budget, the Bank of England announced a reduction in the base rate of interest from 0.75% to 0.25%. This is the lowest level since the 2008 financial crisis.
Other highlights from the budget include:
Tax rates and allowances
The Primary National Insurance (NI) threshold will increase to £9,500 from 6th April 2020. This means that anyone that earns more than £9,500 a year and it is self-employed will save £78.Anyone who is employed will save £104 by the increase in the NI threshold.
The tax-free Personal Allowance remains at £12,500
National Minimum Wage (NMW) and the National Living Wage (NLW)
The chancellor confirmed the following rates from April 2020:
- For workers over 25, the NLW increases to £8.72
- For workers aged 21 to 24, the NMW increases to £8.20
- For workers aged 18 to 20, the NMW increases to £6.45
- For workers under 18, the NMW increases to £4.55
- For apprentices, the NMW increases to £4.15
It was announced that from April 2020 there will be an increase in the simplified expenses available to employees to cover additional household expenses from £4 per week to £6 per week under home working arrangements.
An increase in the Capital Gains annual allowance was announced, from £12,000 to £12.300. In addition, the period allowed to pay any CGT on property sales over to HMRC will be reduced to 30 days from the date of sale.
The Employment Allowance will increase from £3,000 to £4,000 which means employer’s NI bills are reduced. The allowance is restricted to businesses with a NI bill of less than £100,000. From April 2020 employers with an employer NI contributions bill above £100,000 in their previous tax year will no longer qualify for the Employment Allowance.
The Corporation Tax rate will remain at 19%.
Entrepreneurs’ Relief
From 6th April 2020, small business owners will still pay a lower amount of Capital Gains Tax (CGT) when they sell their businesses, but this is reduced significantly to a lifetime allowance from £10m to £1 million. This means the maximum tax reduction is lowered to £100,000.
IR35 for the private sector
It was confirmed that the government will it go ahead with implementing the changes to the off-payroll working rules from 6th April 2020. See our earlier article regarding IR35 Changes and how they affect your business.
Research & Development tax credits
Here will be an increase in the rate of Research & Development Expenditure Credit from 12% to 13% from 1st April 2020.
Tax relief on vehicles
To encourage the uptake of zero and ultra-low emission vehicles, first year allowances for zero emission cars, goods vehicles and equipment for gas refuelling stations will be extended by four years from April 2021.
Changes from April 2021 will mean that zero emission cars will attract first year allowances at 100%, while cars with CO2 emissions not exceeding 50g/km will be eligible for writing down allowances at the main rate of 18%. Vehicles with emissions above 50g/km will be eligible for relief at 6%.
The threshold for restrictions to lease rentals will also be reduced from 110g/km to 50g/km with effect from 6th April 2021.
VAT
From 1st December 2020, a zero rate of VAT will apply to e-publications such as e-books, e-newspapers, e-magazines and academic e-journals.
Female sanitary products
From 1st January 2021 women’s sanitary products will be zero-rated, ending the so-called “tampon tax”.
The VAT registration threshold will remain at the current level of £85,000 until April 2022.
Non-UK resident Stamp Duty Land Tax
Non-UK resident Stamp Duty Land Tax (SDLT) surcharge – The government will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.
