The new Chancellor’s first budget took place against the backdrop of the COVID-19 pandemic. Not surprisingly, funding for the NHS and statutory sick pay rules were a huge focus.
In this article, we’ve provided you with an overview of the key points from the Spring Budget and how they may affect you and your finances.
The standard annual allowance in 2020/21 will remain at £40,000.
However, the two tapered annual allowance thresholds will be raised by £90,000.
Therefore, from 2020-21 the:
a) ‘threshold income’ will be increased from £110,000 to £200,000; and
b) ‘adjusted income’ will be increased from £150,000 to £240,000.
For those with a threshold income above £200,000 and an adjusted income above £240,000, their annual allowance will be reduced by £1 for every £2 that their adjusted income exceeds £240,000, down to a minimum (tapered) annual allowance of £4,000 (£10,000 in 2019/20).
This means that anyone with a threshold income above £200,000 and an adjusted income of at least £312,000 would have a tapered annual allowance of £4,000 in 2020/21.
The standard lifetime allowance (SLA) will increase from £1,055,000 in 2019/20 to £1,073,100 in 2020/21.
There are no changes to income tax rates, bands or allowances for UK taxpayers, with the personal allowance and higher rate threshold remaining at £12,500 and £50,000 respectively for the 2020/21 tax year.
The class 1 National Insurance threshold has increased from £8,632 to £9,500 from 6 April 2020. This change was expected and is in line with the Government’s aim to increase this threshold to £12,500, the point at which income tax is paid.
There are no changes to the upper earnings limit of £50,000 (the level at which the rate drops to 2%) or to the contribution rates.
As expected, the Individual Savings Account (ISA) annual subscription limit remains unchanged at £20,000. However, the annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.
The range of ISAs available remains unchanged, apart from the Help to Buy ISA, which closed to new investors in November 2019 and is effectively replaced by the Lifetime ISA.
The annual capital gains tax allowance will increase to £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, for disposals in the 2020/21 tax year.
From 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) will be reduced from £10 million to £1 million. There are special provisions for contracts for disposals entered into before 11 March 2020 that have not been completed and for certain exchanges of shares and securities made before 11 March 2020.
The residence nil rate band (RNRB) will increase from £150,000 to £175,000 from 6 April 2020, delivering on the Government’s commitment to allow some couples to leave an IHT-free inheritance of up to £1,000,000 to future generations.
As expected, the IHT nil rate band (NRB) will remain frozen at £325,000 until April 2021.
Changes to off-payroll working often referred to as IR35, will be included in the Finance Bill. This will see large and medium-sized private companies becoming responsible for making the decision as to whether contractors working for them should be included on their payroll and deduct PAYE and NIC.
The Government has decided not to reduce the rate of corporation tax from the planned 19% to 17% and instead it will remain unchanged at 19% from 1 April 2020.
A 2% surcharge on non-UK residents purchasing residential property in England and Northern Ireland will be introduced from 1 April 2021. The surcharge is in addition to the standard Stamp Duty rates as well as the 3% surcharge that the Government previously introduced for buy to let properties and second homes.
The government will introduce a relief for qualifying housing co-operatives from the ATED and 15% SDLT on purchases of dwellings over £500,000. The SDLT relief will take effect in England and Northern Ireland from the Autumn Budget and the UK-wide ATED relief from 1 April 2021 with a refund available for 2020-21.
HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes with an aim of driving those who promote tax avoidance schemes out of the market, disrupt the supply chain to stop the spread of marketed tax avoidance, and deter taxpayers from taking up the schemes.
To find out more about how these latest announcements may impact on your financial position, please telephone us on 01772 729742 or alternatively, simply fill out our online enquiry form to arrange a meeting with an adviser at Springfield Financial Services.
Please note that the information provided is based on our current understanding of the 2020 Spring Budget and associated documents and may be subject to alteration as a result of changes in legislation or practice.