New Chancellor, Rishi Sunak, delivered his first Budget on 11 March 2020, just 27 days into his tenure. It was the first of the Boris Johnson government, eagerly anticipated following the December 2019 election win, with a new wave of Conservative voters bonded by Brexit. However, this has come at a time of much economic and social uncertainty.
Given this uncertainty, the government’s appetite to introduce measures to remove allowances and increase taxation was tempered. The maintenance of Entrepreneurs Relief, albeit at a reduced limit of £1m, is welcomed, as is the increase in the level of earnings before the pension tapered annual allowance takes effect.
This budget has been understandably overshadowed by the impact of the Coronavirus and we expect financial markets to remain depressed whilst this plays out. It is too early to predict the full impact.
Key measures announced for businesses:
- Corporation tax will remain at 19% for the 2020/21 tax year. The intention of the Treasury for this to be reduced to 17% in 2020/21 was scrapped.
- The research and development expenditure credit (RDEC) will rise to 13% from 1 April.
- The research and development relief PAYE cap was delayed until 1 April 2021.
- With effect from April 2020, the employment allowance will increase from £3,000 to £4,000. However, only for employers whose national insurance contributions liability in the previous tax year was less than £100,000.
- It was already announced that from 1 April 2020, for one year, 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.
- In response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.
Key measures announced for individuals:
- Entrepreneurs Relief was retained, albeit at a reduced limit of £1m.
- The threshold for class 1 National Insurance Contributions (NICs) increased from £8,632 to £9,500.
- In relation to the pension tapered annual allowance, from 6 April 2020, threshold income will increase from
£110,000 to £200,000. The adjusted income will increase from £150,000 to £240,000 and the minimum reduced tapered allowance will be decreased from £10,000 to £4,000.
- The personal allowance will remain at £12,500.
- The lifetime allowance for pensions will increase from £1,055,000 to £1,073,100 for the 2020/21 tax year.
- Whilst the ISA annual subscription will remain frozen at £20,000, those looking to save for the younger generation will benefit from an increase in the junior ISA annual subscription from £4,368 to £9,000. This comes into effect from 6 April 2020.
- The national living wage will increase by 6.2% from £8.21 per hour to £8.72 per hour.
- The capital gains annual allowance is to be increased to £12,300.
- Those focused on estate planning will be encouraged by the increase in the residence nil-rate band, which will rise to £175,000 from 6 April 2020.
Download our Spring Budget summary report.
The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. The information in this report is based upon our understanding of the Chancellor’s Spring Budget 2020, in respect of which specific implementation details may change when the final legislation and supporting documentation are published. This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. ISA and pensions eligibility depend on personal circumstances. The value of investments can fall as well as rise and you may not get back the full amount you originally invested. Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. All tax tables include numbers, rates and allowances only. None of the usual qualifying notes are included in this report.