2020 budget analysis - moore & smalley · 3/12/2020 · off payroll workers (ir35) changes...
TRANSCRIPT
2020 Budget Analysis12 March 2020
Introduction
- First budget since Oct 2018
- New Chancellor looking to make his mark
- Next Budget November 2020
- Did he ‘Get It Done’?!!
Coronavirus
• Response fund - initially set at £5 billion
• SSP from day 1 for self isolators
• NHS 111 fit note provision. Valid evidence
• Self employed – removal of lower earnings
limit for Universal Credit or Contributory
Employment & Support Allowance
• Business rates retail discount 100% extends
to leisure & hospitality sector for 1 year
Coronavirus
• Pubs rates relief £5,000
• Those covered by Small Business Rates
Relief £3,000 one off grant
• Temporary business interruption loan
scheme. Funding up to £1.2m
• HMRC time to pay… 2,000 experienced call
handlers!
Entrepreneurs’ Relief (ER)
- Why under the spotlight?
- Lifetime limit reduced from £10m to £1m
- With immediate effect from 11 March 2020
- Anti-forestalling provisions also included with
retrospective impact
ER - Anti-forestalling provisions
• Aimed at attacking pre Budget action designed to ‘lock in’ ER on lifetime
limit of £10 million
• Designed to capture transactions in 2019/20 executed before Budget day
where further action required
• Areas of anti-forestalling:
- Manipulation of unconditional contracts
- Share for share/loan note exchanges
• Effectively retrospective legislation!!!
Pensions
2019/20 2020/21
Annual allowance 40,000 40,000
Lifetime allowance 1,055,000 1,073,100
Tapering Adjusted income 150,000 240,000
Threshold income 110,000 200,000
Minimum annual allowance 10,000 4,000
Money purchase annual allowance 4,000 4,000
*Max contribution once adjusted income hits £312,000 is £4,000
Income Tax Rates
2019/20 2020/21 Tax rateDividend tax
rate
Personal allowance 12,500 12,500 0% 0%
Basic rate band 37,500 37,500 20% 7.5%
Higher rate threshold 50,000 50,000 40% 32.5%
Additional rate threshold 150,000 150,000 45% 38.1%
Savings Allowance
2019/20 2020/21
Basic rate taxpayers 1,000 1,000
Higher rate taxpayers 500 500
Additional rate taxpayers 0 0
Starting rate for savings
income
2019/20 2020/21
Starting rate for savings 0% 0%
Starting rate limit for savings 5,000 5,000
Tax free dividends – regardless of level of income
− 2017/18 £5,000
− 2018/19 £2,000
− 2019/20 £2,000
− 2020/21 £2,000
Dividend
allowance
Child benefit
2019/20 2020/21
Eldest/only child £20.70 £21.05
Other children £13.70 £13.95
A tax charge of High Income Child Benefit remains when a member of the
household’s income exceeds £50,000.
− 2019/20 £100,000
− 2020/21 £100,000
Withdrawal at £1 for every £2 by which income exceeds £100,000
No personal allowance where income exceeds
− 2019/20 £125,000
− 2020/21 £125,000
Income limit
for personal
allowance
National insurance
2019/20 2020/21
Primary threshold 8,632 9,500
Upper limit 50,000 50,000
Employees rates up
to/above upper limit
12%
2%
12%
2%
Self employed9%
2%
9%
2%
Employee’s National insurance
For an employee earning over £9,500 this represents an NI saving of £104 for the year 2020/21
National insuranceEmployer’s National insurance
2019/20 2020/21
Secondary threshold 8,632 8,788
Employers rate above
secondary threshold13.8% 13.8%
Class 1 Secondary NIC – on salary
Class 1A NIC – on benefits and expenses
2019/20 2020/21
Employment allowance £3,000 £4,000
Employment allowance
2019/20 2020/21
Employer rate 13.8% 13.8%
2019/20 2020/21
Annual exemption £12,000 £12,300
Basic rate – except residential property 10% 10%
Basic rate – residential (other than exempt main residence) 18% 18%
Higher rate – except residential property 20% 20%
Higher rate – residential (other than exempt main residence) 28% 28%
Capital gains tax (CGT)
Capital gains
tax
Residential property
− CGT payable within 30 days of completion coming in from
April 2020
− 30 day rule already applies to non-residents (penalties!)
HMRC do impose these
− PPR reduce to 9 months from 18 months from 6 April 2020
− Letting relief reform
− From 6 April 2020 will only apply where the owner of the
property is in shared occupancy with the tenant
Stamp Duty Land Tax
− Recap: 3% on second residential property or if bought by a limited company
− Additional 2% for non UK resident purchasers of residential property from 1 April
2021
Inheritance
tax
2019/20 2020/21
Rates for estates 40% 40%
Reduced rate (for estates leaving 10% or
more to charity)36% 36%
Rate (for chargeable lifetime transfers) 20% 20%
Inheritance tax rates
Inheritance
tax
Inheritance tax
(40% above nil rate
band(
Nil rate bandResidence nil
rate band*Total
2017/18 325,000 100,000 425,000
2018/19 325,000 125,000 450,000
2019/20 325,000 150,000 475,000
2020/21 325,000 175,000 500,000
Inheritance tax rate bands
* Restricted for estates over £2 million before reliefs
Tax free savings accounts
2019/20 2020/21
Individual savings
account (ISA)
subscription limit
£20,000 of
which £4,000
can be saved
into a Lifetime
ISA
£20,000 of
which £4,000
can be saved
into a Lifetime
ISA
Junior ISA
subscription limit£4,368 £9,000
Child trust fund
subscription limit£4,368 £9,000
Car/ Van Benefits
- Car benefits
- Diesel supplement kept at 4%
- No income tax or national insurance for provision of
charging facilities for electric or hybrid vehicles at or
near the workplace for own vehicles
- Car fuel - £24,100 multiplier up to £24,500
- Van benefit - £3,430 rises to £3,490
- Van fuel scale charge up from £655 to £666
Car benefit Cars registered before 6 April 2020
CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22
0 N/A 16% 0% 1%
1-50 >130 16% 2% 2%
1-50 70-129 16% 5% 5%
1-50 40-69 16% 8% 8%
1-50 30-39 16% 12% 12%
1-50 <50 16% 14% 14%
51-54 19% 15% 14%
55-59 19% 16% 16%
60-64 19% 17% 17%
65-69 19% 18% 18%
70-74 19% 19% 19%
75-79 22% 20% 20%
The percentage increases 1% for every 5 g/km increase up to the maximum 37%.
Add 4% for diesels up to a maximum of 37%.
The 4% supplement for diesel plug-in hybrids does not apply.
Car benefit Cars registered on or after 6 April 2020
CO2 (g/km) Electric range (miles) 2019/20 2020/21 2021/22
0 N/A 16% 0% 1%
1-50 >130 16% 0% 1%
1-50 70-129 16% 3% 4%
1-50 40-69 16% 6% 7%
1-50 30-39 16% 10% 11%
1-50 <50 16% 12% 13%
51-54 19% 13% 14%
55-59 19% 14% 15%
60-64 19% 15% 16%
65-69 19% 16% 17%
70-74 19% 17% 18%
75-79 22% 18% 19%
The percentage increases 1% for every 5 g/km increase up to the maximum 37%.
Add 4% for diesels up to a maximum of 37%.
The 4% supplement for diesel plug-in hybrids does not apply.
2019/20 2020/21
Apprentices £3.90 £4.15
16-17 year olds £4.35 £4.55
18-20 year olds £6.15 £6.45
21-24 year olds £7.70 £8.20
National living wage 25+* £8.21 £8.72
National minimum wage
* By 2024 national living wage to rise to £10.50
Business tax
Period Rate
1 April 2018 – 31 March 2019 19%
1 April 2019 – 31 March 2020 19%
1 April 2020 – 31 March 2021 17%
1 April 2020 – 31 March 2021 19%
Corporate tax rates
R&D tax
relief - RDEC
R&D expenditure credit (large companies)
− Rate 13% on expenditure incurred on or after 1 April 2020
(12% in 2019/20)
− Effective rate of tax relief = 10.53% (up from 9.72% in
2019/20)
Example of £100,000 spend 2019/20 2020/21
Tax credit 12%/13% x £100,000 12,000 13,000
Less CT on tax credit (2,280) (2,470)
Additional tax relief 9,720 10,530
R&D tax
relief - RDEC
Large company
− More than 500 employees and
− More than €100 million turnover or
− More than €86 million gross assets
− Including all group companies, UK & overseas
R&D tax
relief
− R&D relief – SMEs
− No change – 130% enhancement
− Effective rate of tax relief = 43.7%
− Tax Credit for loss at 14.5% (Restriction of 3 x PAYE/NI bill
deferred 12 months until 1 April 2021)
Example of £100,000 spend £
Tax relief (as normal) @ 19% 19,000
Enhancement £130,000@ 19% 24,700
Total tax relief 43,700
Capital allowances for
structures and buildings
- New structures and buildings allowance
- 3% (from 2% in 2019/20) per year on
cost, straight line
- No clawback on sale of building, new
owner takes over the pool
- Build cost of any commercial buildings,
excluding land
- Renovations/improvements/extensions
qualify
Off payroll workers (IR35)Changes from 6 April 2020, as previously
announced.
Payments to intermediaries (companies /
agencies) for worker’s personal services
Obligation to deduct PAYE/NIC from payments
relating to “deemed” employees
Exception for payments by small companies
Intangible
Fixed Assets
Tiny Relaxation on the rules:
- Corporation Tax relief – normally on
amortisation as charged in P&L
- Previously not available for intangibles
created on or before 1 April 2002 and
acquired from related parties
- CT relief available for acquisitions on or after
1 July 2020
- Restrictions still apply to goodwill
Anti-
Avoidance
- More investment in HMRC “to improve
compliance”
- Expected to yield £4 billion over 5 years – but
very few specific anti-avoidance measures
- Also targeting Tax Avoidance Scheme
Promoters
Making tax digital
- Soft landing period come to an end April 2020
- Digital links must be in place for first filing after 1 April 2020 (1 October 2020 for
those eligible for the deferral)
- Penalties now operational
Indirect taxes
Digital publications
- Unexpected, well overdue and most welcome
- VAT legislation has finally caught up
- From 1 December 2020, digital publications
will be free of VAT
- The possibility of claims for overpaid VAT?
- If the revised legislation follows existing rules
it will apply to:
- Books, booklets, brochures etc
- Newspapers, journals, periodicals
- Painting books?!
- Music, maps and charts etc
Tampon Tax
- Years of campaigning
- Government accepted the need for change
- VAT will be removed on sanitary products
from 1 January 2021
- The power of social media?
Import VAT
- A change from 1 January 2021
- Importers will use postponed VAT accounting
for all imports of goods, whether from the EU
or further afield
- A welcome cash flow boost for manufacturers
and distributors
- A reduction in the bank guarantee or similar
mechanism required for a business’
deferment account
Construction industry
- Reverse charge
- Customer pays VAT to HMRC not the builder
- Effective 1 October 2020
- Accounting systems at the ready
- Identification of correct VAT rate by customer
- Does not apply to zero rated supplies
- Labour and materials
Other changes
• Fuel duty frozen for a 10th year in a row
• Duties frozen on beer, spirits, wine and cider.
This saves a penny on a pint!
• A well overdue but still ongoing consultation
on the modernisation of VAT rules relating to
partial exemption and the capital goods
scheme.
This information is correct at time of Issue 12 March 2020
The purpose of this presentation is to provide technical and generic guidance and should not be interpreted as a personal
recommendation or advice.