Budget 2020

We have summarised Mr Sunak the new Chancellor’s 2020 budget for you.

  • National Insurance (NI) threshold raised to £9,500 up from £8,632
  • Pension taper increased to £200,000 from £110,000 – this helps pension funding restrictions
  • Junior ISA annual limits increased to £9,000 from £4,368. Adult limit remains at £20,000.
  • In the UK the income tax rates and allowances remain at £12,500 for the personal allowance and £50,000 the higher rate threshold
  • The Capital Gains Tax (CGT) allowance has increased to £12,300 for individuals
  • The Inheritance Tax (IHT)  residence nil rate band increases to £175,000 taking the overall IHT allowance up to potentially £500,000 per person
  • Entrepreneurs Relief lifetime allowance reduced to £1million
  • Off-payroll working rules (IR35) reform still scheduled for April 2020
  • Corporation tax rate to remain at 19%

Do you have any NI gaps?

Paying out for voluntary National Insurance contributions now could improve your state pension by up to £4,000 – but it’ll cost more if you wait until after 5 April 2019.

Anyone who reaches state pension age after 5 April 2016 and has a gap in their NI payments between the 2006-07 to 2015-16 tax years has until April 2023 to ‘plug’ the holes by making voluntary contributions. In the new tax year, the amount you pay for voluntary National Insurance (NI) will increase to a more expensive flat rate for all tax years. But, if you pay between £600 and £700 – the equivalent of £100 a week between now and April – you could pay off a missing year in your NI record and secure thousands of pounds of state pension when you retire.

Help for new mothers

From April, the government will rewrite child benefit forms to highlight the risks to stay-at-home parents’ retirement income if they fail to register for child benefit. The forms are available online and given to new mothers in hospitals.

Registering for child benefit allows parents with children under 12 to build up their entitlement to state pensions, even if they do not pay national insurance (NI) contributions.

However, a tax on child benefit for higher earners, introduced in 2013, has discouraged hundreds of thousands from claiming the perk. Since 2013, 516,000 parents have opted out of child benefit — 84% of them women.

About 1.1m families are affected by the tax charge on child benefit, which reduces payments when one parent earns £50,000 or more and wipes out the benefit for those who earn £60,000 and above. The rule applies to married and cohabiting couples.

Families with a higher earner can opt not to receive any child benefit. However, they still need to register and opt out. Parents who fail to do so miss out on the NI credits.

State pension payments will rise by 2.5 per cent next April

…the Department for Work and Pensions has confirmed.

From the 10th April 2017 the value of the flat-rate state pension, brought in earlier this year, will increase to £159.35 from the current rate of £155.60.

Under the Government’s controversial ‘triple lock’ manifesto commitment, the basic and new state pensions will rise in line with the highest of inflation, earnings or 2.5 per cent. 

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