Rishi Sunak received a “hospital pass” when he was appointed Chancellor and was required to deliver the first Budget in nearly 18 months within a month of his appointment. To add to this, Covid-19 arrived on the scene and threatened to overshadow everything. As ever, the devil is in the detail, but we have outlined some highlights below.
Personal Allowance and income tax unchanged
The personal allowance for 2020/21 is unchanged at £12,500, as are the basic, higher and additional income tax rates and bands.
Tax rates for dividend income are also unchanged, despite persistent rumours that these would be increased.
Pension tax relief unchanged
Despite all the press speculation, restrictions in pension tax relief again failed to materialise.
Employees and the self-employed will not pay national insurance on the first £9,500 of earnings from 2020/21, up from £8,632 in 2019/20. Note that employers will be required to pay 13.8% on earnings over £8,788 though.
The NIC employment allowance increases to £4,000 from 2020/21 but will not be available to employers with total employers NIC liabilities in excess of £100,000 p.a.
Statutory sick pay extended to cope with Covid-19
SSP rules have been extended entitlement from day 1 rather than day 4 of absence. Additionally, Government will fully reimburse employers with fewer than 250 employees the SSP paid for the first 14 days of absence.
Tapering of pension annual allowance
One welcome change is the increase in the threshold at which the pension annual allowance starts being tapered. From 2020/21 the adjusted income limit will increase from £150,000 to £240,000.
IR35 ‘off payroll’ rules to go ahead
Despite considerable opposition from businesses, the Government has decided to go ahead with the new rules for workers providing their services through personal service companies from 6 April 2020.
CGT Entrepreneurs Relief restricted
Rather than abolish the relief as had been rumoured, the Chancellor has announced that from 11 March 2020 onwards the relief will only be available against the first £1 million of lifetime gains instead of the previous £10 million limit.
Corporation tax rate unchanged
As previously announced the corporation tax rate is to remain at 19% for the time being. It was scheduled to reduce to 17% from 1 April 2020.
R&D tax credit changes
The Conservative Party manifesto also included a promise to increase R&D expenditure relief for non-SMEs from 12% to 13% and this was confirmed in the March Budget. However, a measure originally announced in the 2018 Budget will limit the amount of repayable R&D tax credit for SMEs will now take effect from 1 April 2021 not 2020.
Small business rates relief extended in England, but not NI
Business rates in NI are set by the NI Assembly. The Finance Minister has not committed to giving small businesses a one-year waiver on their rates bills here.
State benefits increased
Many State Benefits have been frozen, or increases limited, for a number of years. The Government have however decided to increase many State Benefits from 2020/21 including Child Benefit.
This was a surprising budget in many ways, with eye-watering amounts of spending being committed, with minimal apparent tax rises. The reduction in entrepreneurs’ relief is disappointing, but perhaps understandable. IR35 is going to cause headaches for many businesses and individuals, and the decision to not reduce the corporation tax rate sends out mixed signals to the rest of the world about our appetite for business post Brexit.
On the plus side, we welcome the decision to leave income tax rates and pension relief alone, although we suspect pension relief will be revisited at a future date.
It would appear that the Chancellor has decided to avail of record low borrowing costs to fund his plans, rather than squeeze the taxpayer too hard. However, there is another budget later this year, so let’s see what happens then.
At a local level, the Chancellor did pledge an extra £210m in the NI block grant, so the Assembly does have some extra cash to play with but has many competing priorities. Let’s see what happens when the Assembly Budget is published later this month….
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