View or download our full Budget Report here
Spring Budget 2020: Biggest spending spree in 28 years
Yesterday's Budget was the first since October 2018, and the first of new Chancellor Rishi Sunak, delivered just 27 days after he succeeded Sajid Javid.
“Getting it done” is the soundbite the Chancellor clearly wanted us to take away from his debut Budget speech, but “giving it away” might be more accurate.
The government's substantial majority gave Sunak carte blanche to overhaul taxes but, in the end, there were relatively few substantial changes.
Instead, one announcement after another was made on investment in public services, roads and railways. With the Coronavirus (COVID-19) high on the agenda, there were also emergency measures designed to provide respite for beleaguered businesses and to protect jobs.
Having been forced to abandon plans to publish an economic forecast in November 2019, the Office for Budget Responsibility produced an overdue update on the future health of the economy – and it wasn’t good. Its 2020 growth forecast was cut to 1.1%, having forecast 1.4% growth last year, and that’s without taking into account the potential shock to the global economy of COVID-19.
And, while Inheritance Tax may have been on Javid’s mind prior to his Valentine’s Day resignation, it was not on Sunak’s agenda. Despite the Office for Tax Simplification’s multiple recommendations, no change was forthcoming.
Below we have provided an overview of the main announcements, or you can click here to view our full Budget Report.
Business announcements
- Entrepreneurs’ Relief lifetime allowance has been lowered from £10 million to £1m.
- The main rate of Corporation Tax will now remain at 19% from 01 April 2020 and will be set at 19% for the financial year beginning 01 April 2021.
- With effect from April 2020, the employment allowance will increase from £3,000 to £4,000.
- The government has completed a review of the reform to off-payroll working in the private sector and, as planned, the rules will be implemented on 06 April 2020.
- There were a wide range of changes announced in relation to business rates, including the retail discount being increased to 100% and expanded to include hospitality and leisure businesses in response to COVID-19.
- Corporate capital loss restriction: Companies making chargeable gains in accounting periods ending on or after 01 April 2020 will only be able to offset up to 50% of those gains using carried forward capital losses.
- Cash grants of £3,000 for businesses with rateable values of less than £15,000 and a temporary loan scheme for SMEs were announced.
For more information read our full Budget Report here
Personal announcements
- There were no increases to Income Tax.
- The threshold for class 1 primary National Insurance Contributions (NICs) paid by employees and the class 4 NICs paid by the self-employed will increase from £8,632 to £9,500 for 2020/21.
- The lifetime allowance for pension savings increases for 2020/21 from £1,055,000 to £1,073,100.
- From 06 April 2020, the Capital Gains annual exempt amount for individuals and personal representatives will increase from £12,000 to £12,300. For trustees of settlements, it will increase from £6,000 to £6,150.
- A 30-day window for paying Capital Gains Tax on property sales kicks in from 06 April 2020.
- Pension tapered annual allowance: From 06 April 2020, threshold income will increase from £110,000 to £200,000. The adjusted income will increase from £150,000 to £240,000 and the minimum reduced tapered allowance will be decreased from £10,000 to £4,000.
- The residence nil-rate band for Inheritance Tax increases from £150,000 to £175,000 from 06 April 2020.
- The adult ISA annual subscription limit remains at £20,000 for 2020/21 and will rise thereafter in line with CPI. The junior ISA annual subscription limit and the child trust fund annual subscription limit both increase from £4,368 to £9,000 with effect from 06 April 2020.
For more information read our full Budget Report here
Other announcements
- There were no VAT rate increases.
- With effect from 01 April 2021, a 2% stamp duty land tax surcharge will apply to non-UK residents purchasing residential property in England and Northern Ireland.
- VAT on women's sanitary products is to be scrapped from 01 January 2021.
- Zero-rate VAT will also apply to digital publications of books, newspapers, magazines or academic journals from 01 December 2020.
- Firms in the construction industry are reminded about the domestic reverse charge, which was initially announced in Budget 2018 and seeks to reduce fraud.
- An industry working group is to be formed to consider the future application of VAT to financial services.
- In the meantime, the government will be legislating in order to widen the scope of the VAT exemption for the management of special investment funds.
- The duties on alcoholic drinks - beer, cider, wine and spirits - are all being frozen.
- There has been a freeze on fuel duty for the last 10 years, and this continues for at least another year.
- Long-haul air passenger duty (APD) will increase by the Retail Prices Index (RPI) with effect from 01 April 2021, with short-haul rates remaining frozen at £13.
- Starting from 01 April 2020, any zero-emission vehicle with a list price exceeding £40,000 registered from 01 April 2017 to 31 March 2025 will be exempt from the VED ‘expensive car' supplement.
- A new plastic packaging tax will take effect from 01 April 2022 at a rate of £200 per tonne.
- The government intends to make gas and electricity rates equal by 2025. With this in mind, the rates on electricity are being frozen, while the rate on gas will rise to £0.00568/kWh in 2022/23 to £0.00672/kWh in 2023/24.
For more information read our full Budget Report here