Budget 2020 – a Budget for strange days
The first Budget of 2020 may be the most unusual for years
The UK survived 2019 without a Budget. Finally, on 11 March the new Chancellor, Rishi Sunak, presented a postponed Budget, the first of two due this year. This proved to be primarily an emergency Budget, focused on a “temporary, timely and targeted” response to the global economic shock from the Covid-19 pandemic.
Following a range of measures aimed at alleviating the disruption to individuals and businesses over the coming weeks and months, the Chancellor turned his attention to the legislative backlog that had built up because of the earlier delay. Alongside the £12bn of Covid-19 measures, including business rate cuts and extensions to statutory sick pay, there were some limited longer-term announcements:
- The rules were eased for tapering the pensions annual allowance charge for 2020/21 onwards. Both the key trigger limits, the threshold income and adjusted income, were increased by £90,000. So, broadly speaking, if your total net income before tax (excluding pension contributions) is not more than £200,000 in 2020/21, your annual allowance will not be subject to the taper. However, if you are still caught by the rules, your minimum annual allowance could drop from £10,000 to as little as £4,000. The other main pensions allowance, the lifetime allowance, rises in line with inflation to £1,073,100 for 2020/21.
- The entrepreneurs’ relief lifetime limit for gains falls to £1,000,000 from £10,000,000.
- The starting point for employees’ and self-employed national insurance contributions (NICs) will rise from £8,632 to £9,500, providing a NIC saving of up to around £104 a year. However, the corresponding employer threshold will rise to only £8,788 in 2020/21.
- The personal allowance (£12,500) and higher rate threshold (£50,000) were both left unchanged, along with the basic and additional rate thresholds, although some of the minor income tax allowances were increased in line with inflation.Earlier in the year the Holyrood Budget kept the Scottish higher rate tax threshold unchanged for 2020/21 at £43,430, £6,570 below the rest of the UK.
- The rate of corporation tax stays at 19%, instead of falling to 17% as was previously planned. This non-move generated the largest source of additional tax revenue in the Budget.
- The Junior ISA and Child Trust Fund contribution limit was more than doubled to £9,000 per tax year. Other ISA limits were once again left unchanged.
- Amendments have been made to the rules regarding top slicing relief of life insurance policy gains.
- The capital gains tax annual exempt amount was increased to £12,300.
- Several announcements had been expected but did not appear in the Budget. These included the reform of inheritance tax and a general restructuring of the pension tax rules. These gaps might be filled later this year in the autumn Budget.
If you need any information on how the changes announced in the Budget could affect you or actions you should consider before the next Budget, please contact us.
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The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.