Thanks to Brexit and the surprise Christmas present of a General Election last year, we have been kept waiting for the latest Budget. Finally, today, new Chancellor Rishi Sunak delivered his inaugural Budget (the first of two in 2020 as we are also due a Budget in the Autumn).
The opening of the Budget was focussed on detailing the new measures put in place to help deal with the ongoing Coronavirus threat. One win for PSCs is that, contrary to rumour, Entrepreneurs Relief was not scrapped (just reduced, see below), leaving room for contractors affected by the upcoming IR35 reform to give the market time to pick back up again (rather than rushing to close their company to claim the relief).
The main points from the Budget
Entrepreneurs Relief
As of midnight on 11th March 2020, the lifetime allowance for Entrepreneurs Relief has been lowered from £10million to £1million.
National Insurance
From the 20/21 tax year, the class 1 and class 4 primary threshold has been increased from £8,632 to £9,500.
Employment allowance
From 20/21, the employers NI allowance has been increased from £3,000 to £4,000.
Corporation Tax
In the 2016 Budget, it had been announced that from 1st April 2020, corporation tax would be reduced to 17%. In the Budget, it was stated that this will no longer be going ahead, and corporation tax will remain at 19%.
Use of home allowance
From 20/21, the flat rate use of home allowance will increase from £4/week to £6/week.
Savings allowance and ISAs
The savings allowance will remain with the first £5000 being tax free, and the ISA limit will stay the same at £20,000.
Capital Gains Tax annual exemption
This is increasing from £12,000 to £12,300 from 6th April 2020.
Class 2 National Insurance (for sole traders)
This has increased from £3 per week to £3.05 per week from 20/21.
IR35
IR35 was not mentioned at all in the Budget speech and the only mention in the Red Book was:
“At Budget 2018 the government announced that it would reform the off-payroll working rules in the private and third sectors from April 2020. The government has recently concluded a review of the reform, and is making a number of changes to support its smooth and successful implementation. The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules,
and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.”
The Finance Bill will be released on 19th March 2020, so we will keep an eye on this and bring you an update of any further information once we have it.
The following details are unchanged from the 19/20 tax year, and confirmed to carry through to 20/21:
• Personal allowance (£12,500)
• Basic rate tax band (£12,500 – £50,000) taxed at 20%
• Higher rate tax band (£50,001 – £150,000) taxed at 40%
• Additional rate tax band (£150,001 +) taxed at 45%
• Tax free dividend allowance (£2,000)
• Basic rate dividend tax (7.5%), higher rate dividend tax (32.5%), additional rate dividend tax (38.1%)
• VAT rate (20%)
• Class 4 NI rate remains at 9% between lower and upper profits limit (£9,500 – £50,000) and 2% above
upper profits limit.
Coronavirus special measures announced
• Whatever the NHS needs to deal with both trying to search for a vaccine, as well as dealing the increased pressure the illness is causing the health service, they will be provided with- whether it be millions or
billions.
• Statutory sick pay will be available to all those advised to self isolate (from day 1), even if not symptomatic, and workers will be able to obtain a sick note by contacting 111 (rather than going to their GP).
• A temporary coronavirus loan scheme is to be put in place to help small businesses with the financial affects that unavailability of workforce may bring about.
• The government will refund eligible statutory sick pay costs to small/medium businesses (with under 250 employees).
• HMRC will have a dedicated helpline from 11th March 2020 to assist businesses with ‘Time to Pay’ to help companies struggling to pay their taxes on time due to coronavirus issues.
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