By Tom Penman, Tax Partner and Angela Keery, Tax Director
There has been much anticipation around the first budget under Boris Johnston’s Conservative Government.
It is fair to say that businesses have already been through a period of uncertainty around Brexit, with a lot of the practical implications still to be worked through. The arrival of Coronavirus has added to that uncertainty and if it becomes as prevalent as some models predict, it may well be the biggest concern not only for the survival of UK business but businesses worldwide.
In light of these issues, many of us were expecting the budget to contain a range of measures to ease trading conditions and provide some assistance for UK businesses and we welcomed announcements such as:
- Full support for the NHS for any extra resources required to deal with the Coronavirus (regardless of how much it will cost).
- Immediate support for individuals’ finances in light of the challenges arising from Coronavirus – including payment of Statutory Sick Pay from day one. Individuals that are required to self isolate, even if they have no symptoms, will be due Statutory Sick Pay from day one as well.
- Businesses with less than 250 employees will be able to reclaim Statutory Sick Pay from Government.
- The National Insurance Contributions (NIC) threshold, the rate at which employees and employers start paying NIC will increase to £9,500 from April 2020
There were very few unexpected tax changes announced, although as always the devil is in the detail. The main changes affecting local businesses and individuals appear to be:
Income Tax – no increase in the personal allowance of £12,500 or Income Tax rates. The starting rate for the savings tax band and the ISA annual subscription limit remain unchanged. The Junior ISA and Child Trust Fund annual subscription limits have more than doubled from £4,368 to £9,000.
Entrepreneurs’ Relief – The maximum capital gain for individuals that is eligible for Entrepreneurs’ Relief has been reduced from £10m to £1m with immediate effect. This would increase an Entrepreneur’s tax liability by £900,000 on a £10m gain (the effective rate of tax on the £9m now not eligible for Entrepreneurs’ Relief would be 20% as opposed to 10%.)
Pensions and the Annual Allowance Charge – there has been a lot of press and controversy around the Annual Allowance Charge. From 6 April 2020 the rates at which the charge is applicable have been significantly increased from £110,000 to £200,000. This removes everyone with adjusted income in 2020/2021 in excess of £200,000 out of the charge and will be a welcome move for high earners.
The Pensions Lifetime Allowance has increased to £1,073,100 from £1,055,000.
There was good news for employers as the Employment Allowance will increase from £3,000 to £4,000 from April 2020, this should benefit around 65,000 businesses.
Finally, although it was confirmed that the corporation tax rates will remain at 19%, a number of other reliefs were increased including an increase in the Structures and Buildings Allowance from 2% to 3% and an increase in Research & Development (RDEC) from 12% to 13%.
This article first appeared in the Irish News on 12th March 2020.