Headlined by significant increases in public spending and measures to try and protect the economy from COVID-19, the 2020 budget has a few key points for businesses and taxpayers to be aware of.
We have summarised the main points of the budget below, but would stress this is a basic guide only. It should not be used as a definitive guide, since individual circumstances may vary and we would advise clients to contact us directly for specific advice as to how the budget relates to you and your business.
We'd draw particular attention to the changes to small business rates, entrepreneurs relief and the COVID-19 assistance.
Tax Rates and allowances for 2020/21
Dividend allowance
The tax-free dividend allowance is unchanged at £2,000.
Corporation tax
The corporation tax rate will remain at 19%.
Annual investment allowance
Companies will be able to claim £1m as AIA for expenditure incurred from 1 January 2019 to 31 December 2020. No announcement was made on extending the date and if unchanged, it will fall to £200,000.
Fuel Duty
Surpisingly remained frozen again despite an anticpated increase.
Structure and Building allowance
The relief was increased to 3% and will be available for expenditure on non-residential buildings, for which construction contracts are entered into after 29 October 2018. The increase will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax with transitional rules applying.
Making tax digital
There were no announcements on MTD except that the government will publish an evaluation on the introduction of MTD for Vat.
VAT
2020/21
Standard rate
20%
Registration threshold
85,000
Deregistration threshold
83,000
VAT thresholds remain unchanged.
Entrepreneurs’ Relief
The lifetime limit on gains eligible for Entrepreneurs’ Relief has been reduced from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.
IR35 The chancellor has pushed ahead with the IR35 changes due to impact businesses from April 2020. All businesses will need to review the Finance Bill, which will contain the rules to be implemented and explanatory notes.
Employment allowance reform
The allowance was increased to £4,000 but is no longer universal with several conditions applying. Including that from April 2020, this will be limited to employers with an employer NICs bill below £100,000 in the previous tax year.
SSP
Small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP will be refunded for eligible SSP costs.
Increasing the flat rate tax deduction for home working
From April 2020 the maximum flat rate Income Tax deduction available to employees to cover additional household expenses has been increased from £4 to £6 per week where they work at home under homeworking arrangements.
Time to pay
HMRC has a set up a phone helpline 0800 0159 559 to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).
Compliance
HMRC have been given the budget to increase compliance and investigation team headcounts by 1,300, with an expectation that they will raise an additional £4.5bn in tax by 2025, including measures such as a crackdown on taxi firms and scrap metal dealers operating in the grey economy and CIS scheme irregularities.
Pension changes
From 6 April 2020, the adjusted income limit will rise to £240,000 (increased from £150,000) and the threshold income limit will rise to £200,000 (increased from £110,000).
For higher earners the government also reduced the minimum reduced annual allowance that you can have under the tapering rules from £10,000 to £4,000.
Business rates
From April 2020 the 50% Retail Rates Relief announced earlier this year is increased to 100% from April 2020. This relief will be extended to include retail, leisure and hospitality sectors, meaning a full relief for those with a rateable value under £51,000 in these sectors. Additionally, small businesses that qualify for 100% Small Business Rate Relief will be eligible for Small Business Grant Funding of £3000 via local authorities. From April 1 2020 a one year business rates discount of £5000 will be available for pubs with a rateable value below £100,000.
Apprenticeships
SMEs should register on the apprenticeship employer hub before the end of the month to benefit from Apprenticeship levy funding.
R&D
Research & Development Expenditure Credit (RDEC) rate increases from 12% to 13% from 1 April 2020. The changes to the PAYE cap on the payable tax credit in the SME R&D schemes has been delayed until April 2021.
IHT
The Nil-rate band remains at £325,000. The residence nil-rate band for deaths in the following tax years are:
· £100,000 in 2017 to 2018
· £125,000 in 2018 to 2019
· £150,000 in 2019 to 2020
· £175,000 in 2020 to 2021
Interest relief for landlords
Landlords will be able to obtain relief as follows:
Finance cost allowed in full Finance cost allowed at basic rate
Year to 5 April 2020 25% 75%
Year to 5 April 2021 0% 100%
Phoenix and insolvent companies
The government pushed back the change the rules when a business enters insolvency HMRC will be a preferential creditor to 1 December 2020.
AGAIN - This is a basic guide. It should not be used as a definitive guide, since individual circumstances may vary and would advise you to contact us with specific queries.