Key tax changes announced in Budget speech that will affect many individuals and businesses

Yesterday the new Chancellor, Rishi Sunak, presented his first Budget and also the first Budget since the UK formally left the EU on 31 January. Filled with positive announcements on increased earnings, investment in R&D and tax cuts for both individuals and businesses, the Chancellor’s key message was “getting it done”.

What follows is a summary of the key tax changes announced in the speech that will affect many individuals and businesses. At the time of writing, many of the announcements are ‘headlines only’, and we eagerly await the finer details.

The Budget for individuals

For individuals, the amount of national insurance paid by employees and self-employed individuals will be cut following an increase to the Primary Threshold from £8,632 to £9,500 from 6 April 2020. The living wage is also pledged to reach two thirds of median earnings by increasing to £10.50 an hour by 2024.

For pension contributions, the number of people affected by tapering of the annual allowance will reduce as a result of an increase of £90,000 to both the Adjusted Income and Threshold Income limits. This means anyone with an income under £200,000 from April 2020 will not be affected by the tapered annual allowance, giving them the full £40,000 annual allowance. However, those with income over £300,000 will see the minimum amount they can contribute to their pensions each year reduce from the current minimum annual allowance of £10,000, which can taper down to a minimum of £4,000.

To combat the housing crisis in the UK’s biggest cities, the Chancellor confirmed that in addition to the existing rates a surcharge of 2% will be introduced in respect of Stamp Duty Land Tax (SDLT) on residential properties for non-UK residents from 1 April 2021. For those non-UK residents who already have an interest in another property, which currently prompts a 3% surcharge, this would mean an overall surcharge of 5%.

The Budget for business owners

As anticipated, the Chancellor has further reformed entrepreneurs’ relief, deeming it as ineffective and benefitting more than just entrepreneurs.  Instead of abolishing the relief completely, the lifetime limit of £10 million has been reduced to £1 million with effect from 11 March. The Capital Gains Tax rate of 10% when selling a business will, therefore, increase to 20% for eligible chargeable gains above the lifetime limit.

Good news for smaller employers with an employer’s Class 1 National Insurance (NI) bill of less than £100,000 is that the employment allowance will increase from £3,000 to £4,000 from 6 April 2020.

Following the introduction of the Structures and Buildings Allowance in October 2018, to support business investment in constructing non-residential structures and buildings, the allowance will increase from 2% to 3% from April 2020.

An earlier party pledge to cut the rate of Corporation Tax to 17% by 2020 has now been shelved, with the current rate of 19% remaining in place for the coming financial year.

For large companies, in keeping with the Government’s ongoing investment in Research and Development (R&D), those with innovative business activities will see an increase to the current R&D expenditure credit (RDEC) from 12% to 13% from 1 April 2020. The Government is currently consulting on whether expenditure on Data and Cloud Computing should qualify for R&D tax incentives and has pledged to more than double UK R&D funding by 2024.

As tax legislation is constantly evolving, from a tax planning perspective, we would always recommend seeking professional advice before undertaking a transaction. More information on Budget 2020 will follow on our website and please speak to your usual contact at Price Bailey if you would like to discuss any of today’s Budget announcements in more detail.

This post was written by Jenny Weeks and Jerome McCully, Tax Advisory specialists at Price Bailey. If you would like to know more about anything discussed in this post then please contact Price Bailey using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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