The Chancellor of the Exchequer Rishi Sunak has announced that
the bill for addressing the coronavirus pandemic is currently £407bn, which is
equivalent to 10x HS2 projects or 20 Crossrail’s.
The key financial changes announced in the budget are as
The basic rate income tax threshold has been slightly increased from April 2021
to £12,570 from £12,500 and the high rate threshold to £50,270 from £50,000.
The thresholds will then stay at these levels for the following 5 years.
The inheritance tax nil-rate band will remain at the existing level of £325,000
and also the residence nil-rate band of £175,000 until at least 2026. The
residence nil-rate band taper will continue to start at £2 million.
The capital gains annual exempt amount has also been frozen at £12,300 until
Dividends also escaped. The tax-free dividend allowance has been kept at
The pension lifetime allowance has also been frozen at £1,073,100 until 2026.
The state pension will however rise by 2.5% next tax year and the triple lock
will remain in place.
The 0% stamp duty land tax holiday on the first £500,000 has been extended
until 30 June 2021. The threshold will then be reduced down to £250,000 for a
further 3 months and then return back to £125,000 from October.
Lenders have been withdrawing from providing low-deposit mortgages. Therefore
to help first time buyers the government is guaranteeing 95% loan-to-value
mortgages up to £600,000.
From April 2023 corporation tax will increase for companies with profits above
£50,000. Tapering from 19% up to 25% above £250,000. This will affect the UK
companies, but as it is progressive and can be offset by ‘super deduction’ on
business investment as companies investing can benefit from a 130% first-year
IR35 changes delayed from last year will go ahead in April 2021. Companies must
now collect income tax and NIC from the contractor’s fee and pay it over to
The furlough scheme will be extended until October 2021. However, employers
will be asked to contribute 10% in July and increased to 20% in August.
The trading loss carry-back rule has also been extended from the existing one
year to three years.
The VAT reduction for the UK’s tourism and hospitality sector has been extended
until October 2021 and reduced rate of 12.5% will then be applied until April
Business rate reliefs have also been extended to July 2021 and then a reduced
rate of 66% until April 2022.
Chancellor, Rishi Sunak, has announced a range of measures to try and kick-start the economy.
The big story is a cut in VAT for the hospitality sector from 20% to 5% and this will apply to eat-in or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, attractions like cinemas, theme parks and zoos.
He also announced a temporary stamp duty holiday until January 2021 to stimulate the property market. This would exempt the first £500,000 of all property sales from the tax.
government will pay businesses a £1,000 bonus for every staff member that is kept
on for three months when the furlough scheme ends in October. To qualify, the
employee must be paid at least £520 on average, in each month from November to
the end of January.
New schemes were announced to boost employment and training opportunities for 16 – 24 year olds. This includes a ‘Kick Start’ scheme to assist those at risk of long term unemployment by funding six-month work placements to those on universal credit. Further support will be provided to young people in England: funding of £1,000 for each new work experience place; for apprenticeships – funding of £2,000 for each new apprentice aged under 25, and £1,500 for each new apprentice aged 25 and over, from 1st August 2020 to 31st January 2021. The apprenticeship payments will be in addition to the existing £1,000 funding that is provided for young apprentices.
was also a scheme announced that will be launched in August to give 50% off to
people dining out. The scheme will mean 50% off meals eaten at any
registered business between Monday to Wednesday in August, up to a maximum
discount of £10 per head (including children).
If you have
at least one year’s self-assessment history and have filed your 2018-19 tax
return, you are eligible as long as you have trading profits of under £50,000
You will receive a taxable grant of 80% of your average profits. You do not need to apply, you should receive details in the post and the grant in June.
In general, the reimbursement by an employer of employee expenses is
treated for tax purposes as earnings from the employment for the tax year in
which they are paid (ITEPA 2003 ss 70 and 72) and will be taxed in the normal
way. There is, however, an exemption for ‘homeworking arrangements’ which
covers payments made by an employer to an employee in respect of reasonable
additional household expenses incurred in carrying out duties of their
employment at home (ITEPA s 316A). This is currently up to £4 a week (or £18 a
month) but, as announced in the Budget, will be increased to £6 a week from 6
April 2020. An exempt homeworking payment under s 316A can be made to employees
who work at home under a voluntary homeworking scheme (which is a crucial
difference to other expenses claimed by employees outside of these
Costs that may be covered by such homeworking payments include
additional costs of heating and lighting the work area or the metered cost of
increased water use, provided that the additional household costs are
reasonable and incurred in carrying out the employee’s duties. There might also
be increased charges for internet access, home contents insurance, business
telephone calls or the additional cost incurred as a result of business rates
liability (EIM01474). Broadband costs will only be tax exempt if the employee
is not already paying for a broadband connection (EIM01475). Payments for costs
that would be incurred whether or not the employee worked at home – for
example, mortgage interest, rent, council tax or water rates – will not be tax
The chancellor has announced that payments under income tax
self-assessment, normally due on 31 July 2020, will be deferred until 31
During this period, individuals will not be charged any penalties or
interest for late payment.
The deferral will apply automatically to all. Taxpayers who believe that
their 2019/20 income will be lower than their 2018/19 income can make a claim
to reduce their payments on account.
Deferment of VAT payments is effective immediately. Businesses should
cancel their VAT direct debits to HMRC now; otherwise payments will still be
These VAT direct debits should be restarted after 30 June 2020. The
deferment applies to VAT payments due to be made to HMRC between 20 March 2020
and 30 June 2020. HMRC says that
interest will not be applied to the deferred VAT payments.
However, VAT returns must still be submitted on time: it is only the
payment which is deferred.
summarised Mr Sunak the new Chancellor’s 2020 budget for you.
Insurance (NI) threshold raised to £9,500 up from £8,632
taper increased to £200,000 from £110,000 – this helps pension funding
ISA annual limits increased to £9,000 from £4,368. Adult limit remains at
the UK the income tax rates and allowances remain at £12,500 for the personal
allowance and £50,000 the higher rate threshold
Capital Gains Tax (CGT) allowance has increased to £12,300 for individuals
Inheritance Tax (IHT) residence nil rate band increases to £175,000
taking the overall IHT allowance up to potentially £500,000 per person
Relief lifetime allowance reduced to £1million
working rules (IR35) reform still scheduled for April 2020
tax rate to remain at 19%
Business owners across Britain from the start of April must file
VAT returns online using government-approved software. It is the first phase in
the flagship Making Tax Digital policy — and has been beset by delays and
business bosses say the new requirements, which apply (with some
exceptions) to those with a turnover above £85,000, coincide with an
unprecedented cocktail of cost pressures. A hike in the national living wage
and an increase in employer contributions to auto-enrolment pensions also start
in the first week of April.
The measures all come into force days after
Britain is due to leave the EU — and Brexit heaps further uncertainty on the
future of companies, forcing entrepreneurs to change how they keep tax records
feels to many like another unnecessary obstacle put in their way by the
“It was not supposed to
be like this. Making Tax Digital was hailed as a revolution in the tax system
when it was unveiled four years ago by George Osborne, then chancellor, but the
programme has struggled to live up to its billing. Plans to have all individual
and business tax returns submitted digitally by 2020 were scrapped last year,
with officials admitting their targets had been too ambitious.
The 2018 Budget has caused significant concerns for shareholders
in companies that have multiple share classes carrying different rights and
entitlements (also known as alphabet shares).
The new proposed rules change the definition of ‘personal company’
in the ER legislation in such a way as to prevent shareholders in a company
with alphabet shares from claiming ER.
On 21 December 2018, the Government proposed a significant
amendment to the Finance Bill rules defining what constitutes a ‘personal
company’ for ER purposes.
legislation retains the old qualifying criteria (that the shareholder must have
at least 5% of the ordinary share capital of the company and 5% of the
voting rights) but adds in two new conditions, at least one of which will need
to be met:
- The shareholder must
be entitled to 5% of the profits available for distribution to equity holders and
5% of the assets available for distribution on a winding up (these were the
changes originally announced in the 2018 Budget);
- In the event of a disposal
of the ordinary share capital of the company the shareholder would be entitled
to 5% of the disposal proceeds.
Additional provisions set out the process for determining whether
the second test is met at any one time. The legislation does not define
the term ‘proceeds’, which implies that it may extend to some payments made to
debt-holders on a sale of a company.
In its rationale for making the changes, the Treasury has stated that it has laid these amendments to ensure that the conditions for benefitting from the relief operate as intended and to continue ‘supporting enterprise creation and growth in the UK.’
The Income Tax personal allowance will be increased to £12,500 from £11,850 on 6 April 2019.
For higher rate taxpayers, the threshold above which higher earners start paying 40% tax is being increased to £50,000 from £46,350 in 2019-20.
The annual subscription limit for Junior ISAs and Child Trust Funds for 2019/20 will be increased in line with CPI to £4,368.
The Government has increased the limit of individual donations made under the Gift Aid small donations scheme from £20 to £30.
gains tax (CGT) annual exempt amount for individuals rises to £12,000 from
£11,700 on 6 April 2019.