UK Budget 2020 Headlines
The 2020 Budget, delivered by the newly appointed Chancellor Rishi Sunak, had been hotly anticipated. The Chancellor, having only been in the role for a number of weeks, had the usual pressures of steering economic and fiscal policy but against the backdrop of the ongoing threat of Coronavirus, reduced growth forecasts and the uncertainty of getting a post Brexit trade deal. As a result he announced a package of measures totalling £30 billion to try and stimulate the UK economy. Other big commitments included spending £600 billion on major infrastructure projects such as road, rail, broadband housing by 2025.
The question is how is this all going to be paid for? Ahead of the budget some commentators had feared several significant tax rises but on the whole this has not happened. The majority of additional spending will therefore come from further borrowing.
The one big anticipated tax increase, which was first hinted at in the Tory Manifesto, is to restrict the availability of Entrepreneurs’ Relief. From Budget Day, the lifetime limit for this capital gains tax relief reduces from £10 million to £1 million. In addition, there are some very wide ranging anti-forestalling provisions which are likely to catch out those individuals who have tried to accelerate disposals ahead of the announcements.
Of benefit to higher earners is the announcement to increase the limit, at which the pension allowance is reduced, by £90,000. Other notable and welcome tax changes from April 2020 include an increase in the Structures and Buildings Allowance from 2% to 3%, an increase in the limits for both Class 1 Primary and Class 4 National Insurance to £9,500 and an increase in the Employment Allowance from £3,000 to £4,000.
Following the earlier publication of a report in January recommending significant reform to Inheritance Tax, particularly the abolition of reliefs for businesses including agriculture, commentators were very relieved to see no mention of Inheritance Tax in the Budget. Many will now look to the Autumn statement to see if the Government have discounted the report or have simply put it to one side with the intention of revisiting it.
The Chancellor confirmed that the current rate of corporation tax will remain unchanged at 19%. Also remaining the same, with no inflationary increase, is the individual tax free personal allowance and basic rate band. The Chancellor confirmed that the unpopular off payroll working reforms will proceed as planned from April 2020.
Many welcomed the announcement that firms with less than 250 employees will be eligible to have paid sick pay, for up to 14 days, fully refunded and that business rates in England will be temporarily abolished for businesses operating in retail, leisure and hospitality sectors with a rateable value of property less than £51,000. In addition, firms eligible for small business rates relief will get a £3,000 cash grant.
Overall there is feeling that the tax measures announced in the budget were considerably better than feared and the main change is the Government’s willingness to now borrow more. The Government is clearly assuming that future borrowing costs will remain low!
Author: James Cornthwaite FCA CTA
A former pupil at St Aidan’s C of E High School, James attended Blackpool Sixth Form College and Lancaster University, graduating in 2004, gaining BSc. first class honours. He joined Moore and Smalley, Preston in 2005 and qualified as a...
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