Latest News – Budget 2020
On Wednesday 11th March 2020 Rishi Sunak presented the first Budget of the new Government. So what exactly did the Chancellor say and, more importantly, what did it actually mean?
Naylor Wintersgill tax director Chris Gumbley comments:
The build up to the first Budget delivered by Rishi Sunak yesterday was of course dominated by coronavirus fears and the dramatic effect on global stock markets, together with various comments in the press regarding the possible abolition of Entrepreneurs’ Relief (basically, the “10% CGT rate”) and a reform of the inheritance tax rules.
With regard to Entrepreneurs’ Relief, in the lead up to the Budget we saw comments such as: “Mr Sunak has decided to scrap the tax break because it mostly benefits rich business people in the south of England”
With regard to inheritance tax, an All-party Parliamentary Group report in January suggested various radical reforms, including abolishing many reliefs and introducing a lifetime “gift tax”.
We also saw calls for more time to pay tax bills and a business rates holiday.
So what are the main proposals from this year’s Spring Budget?
Understandably there was a focus on measures to help people and businesses affected by the coronavirus, including changes to the rules for Statutory Sick Pay, reductions in business rates, a £3,000 cash grant for the smallest businesses and more resources to be spent by HMRC dealing with people requesting time to pay their tax bills. All of these measures will be most welcome, particularly to small businesses.
There was indeed a change to Entrepreneurs’ Relief – but it was not abolished. Instead, the lifetime limit has been reduced to £1m per person, from the previous £10m, for all disposals on or after 11 March 2020. This is still a significant relief, meaning, for example, that a husband and wife could sell their business for £2m and pay tax of only £200,000. It is therefore most certainly worth ensuring that people structure their businesses to ensure that they qualify for this relief.
There were also increases in the R&D tax credit (to 13%), employment allowance (to £4,000) and Structures and Buildings Allowance (to 3%) which are again helpful to various businesses.
The Budget also confirmed that the corporation tax rate will remain at 19%, instead of reducing to 17% - and that the rate will remain at 19% until 5 April 2022. With regard to Inheritance Tax, no changes at all were announced – but these may come at a later date.
The Budget has confirmed that there will be no benefit in kind charged for all zero emission cars for the 2019/20 tax year and 100% of the cost of the car to the employer will be tax deductible.
Overall, there has been positive reaction to the Budget, with various tax reliefs being increased or retained – at least to some degree. The proposals remained the same with regard to income tax, with an increase in the National Insurance primary threshold and lower profits limit to £9,500 (from £8,632) from 6th April 2020 that will be welcomed by employees and the self-employed respectively.
At Naylor Wintersgill, over the next few weeks we will be considering in detail the Budget changes and the possible tax planning opportunities that may arise as a result.
In the meantime, if you have any particular concerns as to how the changes might affect you or your business please do not hesitate to get in touch.
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