2020 Budget Analysis12 March 2020

Introduction

- First budget since Oct 2018

- New Chancellor looking to make his mark

- Next Budget November 2020

- Did he ‘Get It Done’?!!

Coronavirus

• Response fund - initially set at £5 billion

• SSP from day 1 for self isolators

• NHS 111 fit note provision. Valid evidence

• Self employed – removal of lower earnings

limit for Universal Credit or Contributory

Employment & Support Allowance

• Business rates retail discount 100% extends

to leisure & hospitality sector for 1 year

Coronavirus

• Pubs rates relief £5,000

• Those covered by Small Business Rates

Relief £3,000 one off grant

• Temporary business interruption loan

scheme. Funding up to £1.2m

• HMRC time to pay… 2,000 experienced call

handlers!

Entrepreneurs’ Relief (ER)

- Why under the spotlight?

- Lifetime limit reduced from £10m to £1m

- With immediate effect from 11 March 2020

- Anti-forestalling provisions also included with

retrospective impact

ER - Anti-forestalling provisions

• Aimed at attacking pre Budget action designed to ‘lock in’ ER on lifetime

limit of £10 million

• Designed to capture transactions in 2019/20 executed before Budget day

where further action required

• Areas of anti-forestalling:

- Manipulation of unconditional contracts

- Share for share/loan note exchanges

• Effectively retrospective legislation!!!

Pensions

2019/20 2020/21

Annual allowance 40,000 40,000

Lifetime allowance 1,055,000 1,073,100

Tapering Adjusted income 150,000 240,000

Threshold income 110,000 200,000

Minimum annual allowance 10,000 4,000

Money purchase annual allowance 4,000 4,000

*Max contribution once adjusted income hits £312,000 is £4,000

Income Tax Rates

2019/20 2020/21 Tax rateDividend tax

rate

Personal allowance 12,500 12,500 0% 0%

Basic rate band 37,500 37,500 20% 7.5%

Higher rate threshold 50,000 50,000 40% 32.5%

Additional rate threshold 150,000 150,000 45% 38.1%

Savings Allowance

2019/20 2020/21

Basic rate taxpayers 1,000 1,000

Higher rate taxpayers 500 500

Additional rate taxpayers 0 0

Starting rate for savings

income

2019/20 2020/21

Starting rate for savings 0% 0%

Starting rate limit for savings 5,000 5,000

Tax free dividends – regardless of level of income

− 2017/18 £5,000

− 2018/19 £2,000

− 2019/20 £2,000

− 2020/21 £2,000

Dividend

allowance

Child benefit

2019/20 2020/21

Eldest/only child £20.70 £21.05

Other children £13.70 £13.95

A tax charge of High Income Child Benefit remains when a member of the

household’s income exceeds £50,000.

− 2019/20 £100,000

− 2020/21 £100,000

Withdrawal at £1 for every £2 by which income exceeds £100,000

No personal allowance where income exceeds

− 2019/20 £125,000

− 2020/21 £125,000

Income limit

for personal

allowance

National insurance

2019/20 2020/21

Primary threshold 8,632 9,500

Upper limit 50,000 50,000

Employees rates up

to/above upper limit

12%

2%

12%

2%

Self employed9%

2%

9%

2%

Employee’s National insurance

For an employee earning over £9,500 this represents an NI saving of £104 for the year 2020/21

National insuranceEmployer’s National insurance

2019/20 2020/21

Secondary threshold 8,632 8,788

Employers rate above

secondary threshold13.8% 13.8%

Class 1 Secondary NIC – on salary

Class 1A NIC – on benefits and expenses

2019/20 2020/21

Employment allowance £3,000 £4,000

Employment allowance

2019/20 2020/21

Employer rate 13.8% 13.8%

2019/20 2020/21

Annual exemption £12,000 £12,300

Basic rate – except residential property 10% 10%

Basic rate – residential (other than exempt main residence) 18% 18%

Higher rate – except residential property 20% 20%

Higher rate – residential (other than exempt main residence) 28% 28%

Capital gains tax (CGT)

Capital gains

tax

Residential property

− CGT payable within 30 days of completion coming in from

April 2020

− 30 day rule already applies to non-residents (penalties!)

HMRC do impose these

− PPR reduce to 9 months from 18 months from 6 April 2020

− Letting relief reform

− From 6 April 2020 will only apply where the owner of the

property is in shared occupancy with the tenant

Stamp Duty Land Tax

− Recap: 3% on second residential property or if bought by a limited company

− Additional 2% for non UK resident purchasers of residential property from 1 April

2021

Inheritance

tax

2019/20 2020/21

Rates for estates 40% 40%

Reduced rate (for estates leaving 10% or

more to charity)36% 36%

Rate (for chargeable lifetime transfers) 20% 20%

Inheritance tax rates

Inheritance

tax

Inheritance tax

(40% above nil rate

band(

Nil rate bandResidence nil

rate band*Total

2017/18 325,000 100,000 425,000

2018/19 325,000 125,000 450,000

2019/20 325,000 150,000 475,000

2020/21 325,000 175,000 500,000

Inheritance tax rate bands

* Restricted for estates over £2 million before reliefs

Tax free savings accounts

2019/20 2020/21

Individual savings

account (ISA)

subscription limit

£20,000 of

which £4,000

can be saved

into a Lifetime

ISA

£20,000 of

which £4,000

can be saved

into a Lifetime

ISA

Junior ISA

subscription limit£4,368 £9,000

Child trust fund

subscription limit£4,368 £9,000

Car/ Van Benefits

- Car benefits

- Diesel supplement kept at 4%

- No income tax or national insurance for provision of

charging facilities for electric or hybrid vehicles at or

near the workplace for own vehicles

- Car fuel - £24,100 multiplier up to £24,500

- Van benefit - £3,430 rises to £3,490

- Van fuel scale charge up from £655 to £666

Car benefit Cars registered before 6 April 2020

CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22

0 N/A 16% 0% 1%

1-50 >130 16% 2% 2%

1-50 70-129 16% 5% 5%

1-50 40-69 16% 8% 8%

1-50 30-39 16% 12% 12%

1-50 <50 16% 14% 14%

51-54 19% 15% 14%

55-59 19% 16% 16%

60-64 19% 17% 17%

65-69 19% 18% 18%

70-74 19% 19% 19%

75-79 22% 20% 20%

The percentage increases 1% for every 5 g/km increase up to the maximum 37%.

Add 4% for diesels up to a maximum of 37%.

The 4% supplement for diesel plug-in hybrids does not apply.

Car benefit Cars registered on or after 6 April 2020

CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22

0 N/A 16% 0% 1%

1-50 >130 16% 0% 1%

1-50 70-129 16% 3% 4%

1-50 40-69 16% 6% 7%

1-50 30-39 16% 10% 11%

1-50 <50 16% 12% 13%

51-54 19% 13% 14%

55-59 19% 14% 15%

60-64 19% 15% 16%

65-69 19% 16% 17%

70-74 19% 17% 18%

75-79 22% 18% 19%

The percentage increases 1% for every 5 g/km increase up to the maximum 37%.

Add 4% for diesels up to a maximum of 37%.

The 4% supplement for diesel plug-in hybrids does not apply.

2019/20 2020/21

Apprentices £3.90 £4.15

16-17 year olds £4.35 £4.55

18-20 year olds £6.15 £6.45

21-24 year olds £7.70 £8.20

National living wage 25+* £8.21 £8.72

National minimum wage

* By 2024 national living wage to rise to £10.50

Business tax

Period Rate

1 April 2018 – 31 March 2019 19%

1 April 2019 – 31 March 2020 19%

1 April 2020 – 31 March 2021 17%

1 April 2020 – 31 March 2021 19%

Corporate tax rates

R&D tax

relief - RDEC

R&D expenditure credit (large companies)

− Rate 13% on expenditure incurred on or after 1 April 2020

(12% in 2019/20)

− Effective rate of tax relief = 10.53% (up from 9.72% in

2019/20)

Example of £100,000 spend 2019/20 2020/21

Tax credit 12%/13% x £100,000 12,000 13,000

Less CT on tax credit (2,280) (2,470)

Additional tax relief 9,720 10,530

R&D tax

relief - RDEC

Large company

− More than 500 employees and

− More than €100 million turnover or

− More than €86 million gross assets

− Including all group companies, UK & overseas

R&D tax

relief

− R&D relief – SMEs

− No change – 130% enhancement

− Effective rate of tax relief = 43.7%

− Tax Credit for loss at 14.5% (Restriction of 3 x PAYE/NI bill

deferred 12 months until 1 April 2021)

Example of £100,000 spend £

Tax relief (as normal) @ 19% 19,000

Enhancement £130,000@ 19% 24,700

Total tax relief 43,700

Capital allowances for

structures and buildings

- New structures and buildings allowance

- 3% (from 2% in 2019/20) per year on

cost, straight line

- No clawback on sale of building, new

owner takes over the pool

- Build cost of any commercial buildings,

excluding land

- Renovations/improvements/extensions

qualify

Off payroll workers (IR35)Changes from 6 April 2020, as previously

announced.

Payments to intermediaries (companies /

agencies) for worker’s personal services

Obligation to deduct PAYE/NIC from payments

relating to “deemed” employees

Exception for payments by small companies

Intangible

Fixed Assets

Tiny Relaxation on the rules:

- Corporation Tax relief – normally on

amortisation as charged in P&L

- Previously not available for intangibles

created on or before 1 April 2002 and

acquired from related parties

- CT relief available for acquisitions on or after

1 July 2020

- Restrictions still apply to goodwill

Anti-

Avoidance

- More investment in HMRC “to improve

compliance”

- Expected to yield £4 billion over 5 years – but

very few specific anti-avoidance measures

- Also targeting Tax Avoidance Scheme

Promoters

Making tax digital

- Soft landing period come to an end April 2020

- Digital links must be in place for first filing after 1 April 2020 (1 October 2020 for

those eligible for the deferral)

- Penalties now operational

Indirect taxes

Digital publications

- Unexpected, well overdue and most welcome

- VAT legislation has finally caught up

- From 1 December 2020, digital publications

will be free of VAT

- The possibility of claims for overpaid VAT?

- If the revised legislation follows existing rules

it will apply to:

- Books, booklets, brochures etc

- Newspapers, journals, periodicals

- Painting books?!

- Music, maps and charts etc

Tampon Tax

- Years of campaigning

- Government accepted the need for change

- VAT will be removed on sanitary products

from 1 January 2021

- The power of social media?

Import VAT

- A change from 1 January 2021

- Importers will use postponed VAT accounting

for all imports of goods, whether from the EU

or further afield

- A welcome cash flow boost for manufacturers

and distributors

- A reduction in the bank guarantee or similar

mechanism required for a business’

deferment account

Construction industry

- Reverse charge

- Customer pays VAT to HMRC not the builder

- Effective 1 October 2020

- Accounting systems at the ready

- Identification of correct VAT rate by customer

- Does not apply to zero rated supplies

- Labour and materials

Other changes

• Fuel duty frozen for a 10th year in a row

• Duties frozen on beer, spirits, wine and cider.

This saves a penny on a pint!

• A well overdue but still ongoing consultation

on the modernisation of VAT rules relating to

partial exemption and the capital goods

scheme.

This information is correct at time of Issue 12 March 2020

The purpose of this presentation is to provide technical and generic guidance and should not be interpreted as a personal

recommendation or advice.