Helping to provide clarity
The chancellor has announced that payments under income tax self-assessment, normally due on 31 July 2020, will be deferred until 31 January 2021.
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 taken automatically.
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.
We have summarised Mr Sunak the new Chancellor’s 2020 budget for you.
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 complications.
Small 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 government.
“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.
The revised 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:
AND/OR
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.
The capital gains tax (CGT) annual exempt amount for individuals rises to £12,000 from £11,700 on 6 April 2019.
The Government announced plans to reform the off-payroll working rules – known as IR35 – in the private sector from April 2020. Responsibility for operating the off-payroll working rules will move to the firm engaging the worker. Small organisations will be exempt to ease the administrative burden for the vast majority of engagers, while medium and large organisations will be given support and guidance by HMRC.
In order to provide support to the high street, the Government is to reduce business rates by one-third for many retail properties with a rateable value below £51,000 for two years from April 2019, subject to state aid limits. The move is expected to save these struggling businesses £900m. Support for British high street will be supported by a £675m Future High Streets Fund to redevelop empty shops as homes and offices. There will be a new mandatory 100% business rates relief for public lavatories.
…will be extended in England and Northern Ireland to apply to all first-time buyers purchasing residential property worth up to £500,000 through a qualifying shared ownership scheme. The relief will also apply to shared ownership property buyers who have already paid SDLT on the initial equity stake and rental amount since the introduction of the relief on 22 November 2017. They will have a year to make a backdated claim for the relief. This measure will be effective from 29 October 2018.
Currently lettings relief can be claimed by individuals who let out a property that is, or has in the past been, their main residence. From April 2020, the government will reform lettings relief so that it is only available to individuals in shared occupancy with a tenant.
Currently, the final period exemption means that people do not have to pay CGT on gains made in the final 18 months of ownership. From April 2020, the exemption will be reduced to 9 months. There will be no changes to the 36 months final period exemption available to disabled people or those in a care home.
Individuals who replace their main residence can reclaim the SDLT where the new home was purchased before selling the old, subject to the old residence being sold within 3 years of the new home purchase.
The residence nil-rate band (RNRB) increases to £150,000 from £125,000 from 6 April 2019 and to £175,000 from 6 April 2020; allowing some couples to leave up to £950,000 to future generations free of IHT.
Capital gains tax arising on the disposal of any type of asset can be deferred by a subscription for EIS shares. To qualify for the relief the investment must be made during a period covering one year before the gain arose and three years thereafter.
The tax on any gain deferred in this way only becomes due on the subsequent disposal of the EIS shares or if the investor ceases to be UK resident within three years of issue of the shares. However, the gain can be deferred again by using the sale proceeds to make another EIS subscription.
There is no limit on the amount that can be invested in EIS shares but only the first £1,000,000 investment in a tax year will be entitled to income tax relief at up to 30% (for 2017-18).
…and, from 6 April 2017 interest payments from OEICs, authorised UTs, investment trusts and peer-to-peer loans are also paid gross. All individual taxpayers (so not trustees) are entitled to a £2,000 dividend allowance (was £5,000 in 2017/18) and to a personal savings allowance of £1,000 (basic rate taxpayer) or £500 (higher ratetaxpayer). On income in excess of these allowances basic rate for dividends is 7.5%, higher rate is 32.5% and additional rate and trust rate is 38.1%. Equivalent income tax rates on savings income are 20%, 40% and 45%.