The Chancellor of the Exchequer, Rishi Sunak, has delivered his first Budget which he heralded as ‘the budget that gets it done’.With a raft of spending pledges and financial commitments to help tackle the new coronavirus, it would not have been a surprise for Sunak to have announced some of the punitive tax changes that had been speculated ahead of the Budget.Instead, few tax changes were announced and these will be welcome changes for many.

Coronavirus

Sunak acknowledged that the new coronavirus will create challenges for individuals, businesses and the global economy.The Chancellor announced measures to help mitigate the financial implications of the virus, which include:

• Statutory Sick Pay (SSP) will be available for those off work due to coronavirus, including those that have been advised to self isolate, and will be paid from Day 1, rather than Day 4.Sick notes can be provided by contacting NHS 111 rather than by a doctor.
• The government will refund the cost of providing SSP for up to 14 days to employers with less than 250 employees.
• For those who are not eligible for SSP, such as self employed individuals, Employment and Support Allowance will be payable from Day 1, rather than Day 8.
• For 2020/21, retail, leisure and tourism businesses with a rateable value below £51,000 will benefit from 100% business rates relief.
• A £3,000 cash grant will be available to any business eligible for small business rates relief.

Entrepreneurs’ Relief

• Entrepreneurs’ Relief allows qualifying capital gains to be taxed at 10%, rather than 20%.The relief has been criticised as being ineffective in supporting entrepreneurs and there has been speculation that it would be abolished in the Budget.
• The Chancellor however confirmed that the relief would continue, but it would be restricted by reducing the lifetime limit from £10m to £1m with effect from 11 March 2020. As a result, only £1m of qualifying gains per individual will be eligible for relief, costing individuals up to £900,000 of Capital Gains Tax.
• Whilst Entrepreneurs’ Relief will continue to allow individuals to tax efficiently sell parcels of land, for example, the reduced lifetime limit is likely to increase Capital Gains Tax liabilities on the sale of farms and land for development.

Pensions

• An individual can benefit from tax relief on pension contributions of up to the Annual Allowance of £40,000 per year (subject to unused brought forward allowances).The Annual Allowance is currently tapered to a minimum of £10,000 per year where an individual’s income exceeds £150,000.From April 2020, the taper threshold will increase from £150,000 to £240,000.The minimum Annual Allowance, currently £10,000, will however reduce from £10,000 to £4,000.
• An individual with income of, say, £220,000, could currently only benefit from tax relief on pension contributions of £10,000 per year.From 6 April 2020, that individual will be able to benefit from tax relief on contributions of £40,000.
• An individual with income of £300,000 could however currently benefit from tax relief on contributions of £10,000, but this would reduce to £4,000 from 6 April 2020.
• The increase of the taper threshold is a particularly welcome announcement for those with high incomes, particularly following the speculation that tax relief on pension contributions would be limited to the basic rate of 20%.

Structures and Buildings Allowance

• The allowance was introduced in October 2018 to provide tax relief on qualifying expenditure on the construction, renovation or conversion of non-residential structures and buildings.Tax relief was available on 2% of the cost per year, but this is set to increase to 3% from April 2020. Businesses will therefore benefit from tax relief on qualifying costs over 33 years, rather than 50 years.

Tax rates, thresholds and allowances

• The Chancellor confirmed that the Corporation Tax rate will remain at 19%.
• The National Insurance Contributions (NIC) threshold is set to increase from £8,632 to £9,500 from 6 April 2020, for both self employed individuals paying Class 4 NIC at 9% and employees paying Class 1 NIC at 12%.
• The Personal Allowance is set to remain at £12,500.
• The Capital Gains Tax Annual Exempt Amount will increase from £12,000 to £12,300 with effect from 6 April 2020.
• The Employment Allowance is to increase from £3,000 to £4,000 from 6 April 2020, reducing the amount of Employer’s NICs payable.

Please do not hesitate to contact us to discuss how these changes could affect you and your family.

The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.

Written by Victoria Paley ACA CTA

Victoria Paley ACA CTA

Senior Tax Manager

Victoria joined the practice in July 2019 having worked in accountancy and tax in the rural sector since 2010. As a Chartered Accountant and Chartered Tax Adviser Victoria spends most of her time advising family farming businesses on Capital Gains Tax and Inheritance Tax matters primarily in relation to succession planning and capital transactions.

Outside of work Victoria spends most of her time running around after her two young children and riding her horse. Having always loved to travel, Victoria hopes to resume exploring the world with her family once the children are a little older!

T: 01823 462908

E: Victoria.Paley@evolutionabs.co.uk