Budget 2020

Rates and allowances

 

2019/20

2020/2021

 

 

 

£

£

 

 

Income tax rates - (non-dividend income)

 

 

0% lower rate tax - savings rate only

Up to 5,000

Up to 5,000

 

 

20% basic rate tax

12,501 to 50,000

12,501 to 50,000

 

 

40% higher rate tax

50,001 to 150,000

50,001 to 150,000

 

 

45% additional rate tax

Above 150,000

Above 150,000

 

 

Scottish Income tax rates - (non-dividend income)

 

 

19% starting rate tax

12,501 to 14,549

12,501 to 14,585

 

 

20% basic rate tax

14,550 to 24,944

14,586 to 25,158

 

 

21% intermediate rate tax

29,945 to 43,430

25,159 to 43,430

 

 

41% higher rate tax

43,431 to 150,000

43,431 to 150,000

 

 

46% top rate

Above 150,000

Above 150,000

 

 

Personal allowance

 

 

Personal allowance

12,500

12,500

 

 

 

 

 

 

 

 

Dividend allowance

The tax-free dividend allowance is unchanged at £2,000.

 

Corporation tax

The corporation tax rate will remain at 19%.

 

Annual investment allowance

Companies will be able to claim £1m as AIA for expenditure incurred from 1 January 2019 to 31 December 2020. No announcement was made on extending the date and if unchanged, it will fall to £200,000.

 

Structure and Building allowance

The relief was increased to 3% and will be available for expenditure on non-residential buildings, for which construction contracts are entered into after 29 October 2018. The increase will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax with transitional rules applying.

 

Making tax digital

There were no announcements on MTD except that the government will publish an evaluation on the introduction of MTD for Vat.

 

VAT

 

2019/20

2020/21

 

£

£

VAT

Standard rate

20%

20%

Registration threshold

85,000

85,000

Deregistration threshold

83,000

83,000

VAT thresholds remain unchanged.

 

Entrepreneurs’ Relief

The lifetime limit on gains eligible for Entrepreneurs’ Relief has been reduced from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.

 

IR35
The chancellor has pushed ahead with the IR35 changes due to impact businesses from April 2020. All businesses will need to review the Finance Bill, which will contain the rules to be implemented and explanatory notes.

 

Employment allowance reform

The allowance was increased to £4,000 but is no longer universal with several conditions applying. Including that from April 2020, this will be limited to employers with an employer NICs bill below £100,000 in the previous tax year.

 

SSP

Small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP will be refunded for eligible SSP costs.

 

Increasing the flat rate tax deduction for home working

From April 2020 the maximum flat rate Income Tax deduction available to employees to cover additional household expenses has been increased from £4 to £6 per week where they work at home under homeworking arrangements.

Time to pay

HMRC has a set up a phone helpline 0800 0159 559 to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).

Compliance

HMRC have been given the budget to increase compliance and investigation team headcounts by 1,300, with an expectation that they will raise an additional £4.5bn in tax by 2025, including measures such as a crackdown on taxi firms and scrap metal dealers operating in the grey economy and CIS scheme irregularities.

 

Pension changes

From 6 April 2020, the adjusted income limit will rise to £240,000 (increased from £150,000) and the threshold income limit will rise to £200,000 (increased from £110,000).

For higher earners the government also reduced the minimum reduced annual allowance that you can have under the tapering rules from £10,000 to £4,000.

 

Business rates

From April 2020 the 50% Retail Rates Relief announced earlier this year is increased to 100% from April 2020. This relief will be extended to include retail, leisure and hospitality sectors, meaning a full relief for those with a rateable value under £51,000 in these sectors. Additionally, small businesses that qualify for 100% Small Business Rate Relief will be eligible for Small Business Grant Funding of £3000 via local authorities. From April 1 2020 a one year business rates discount of £5000 will be available for pubs with a rateable value below £100,000.

 

Apprenticeships

SMEs should register on the apprenticeship employer hub before the end of the month to benefit from Apprenticeship levy funding. You can find out more about ACCA Apprenticeship Programmes here.

 

R&D

Research & Development Expenditure Credit (RDEC) rate increases from 12% to 13% from 1 April 2020. The changes to the PAYE cap on the payable tax credit in the SME R&D schemes has been delayed until April 2021.


IHT

The Nil-rate band remains at £325,000. The residence nil-rate band for deaths in the following tax years are:

  • £100,000 in 2017 to 2018

  • £125,000 in 2018 to 2019

  • £150,000 in 2019 to 2020

  • £175,000 in 2020 to 2021

 

Interest relief for landlords

Landlords will be able to obtain relief as follows:

Finance cost allowed in full Finance cost allowed at basic rate

Year to 5 April 2020 25% 75%

Year to 5 April 2021 0% 100%

 

Phoenix and insolvent companies

The government pushed back the change the rules when a business enters insolvency HMRC will be a preferential creditor to 1 December 2020.

ATED (Annual Tax on Enveloped Dwellings)

The ATED charges increase automatically each year in line with inflation (based on the previous September’s CPI).

 

 

2019/20

 

2020/2021

 

£

 

£

 

Annual Tax on Enveloped Dwellings (ATED)

More than £0.5m but not more than £1m

3,650

 

3,700

More than £1m but not more than £2m

7,400

 

7,500

More than £2m but not more than £5m

24,800

 

25,200

More than £5m but not more than £10m

57,900

 

59,850

More than £10m but not more than £20m

116,100

 

118,050

More than £20m

232,350

 

236,250

LEGAL NOTICE

This is a basic guide prepared for colleagues and clients. It should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.

In any event the budget is, as always, subject to Royal Assent.