The Chancellor, Rishi Sunak, delivered the UK Budget on Wednesday 11th March. In the first Budget of the new decade the Chancellor claimed the Conservative Government is “getting it done”. So what did the Chancellor say and what does this mean?
There were a few key tax measures of interest, which are summarised below:
- The Chancellor has frozen personal allowances at £12,500 and the Higher Rate threshold at £50,000 for the 2020/21 tax year (Scottish taxpayers are not impacted by these measures).
- There are no changes announced to the dividend starting rate or the savings starting rate.
- Tax rates applicable to dividend income remain unchanged.
- The National Insurance threshold will increase from 6 April 2020 from £8,632 to £9,516 for employed individuals (and £9,500 for self-employed individuals). There is no change to the upper limit for primary contributions.
- The pensions lifetime allowance is increased to £1,073,100.
- There were further changes to the pensions tapered annual allowance. The threshold income (the level where potential adjustments need to be taken into account) increases from £110,000 to £200,000 and the adjusted income (above which the allowance is tapered) increases from £150,000 to £240,000.
- For individuals still impacted by the tapered annual allowance, the minimum tapered annual allowance is reduced from £10,000 to £4,000.
- Entrepreneurs’ Relief has been amended to restrict the lifetime allowance from £10m to £1m. This has effect for disposals made on or after Budget day. In addition there is forestalling legislation being introduced to counteract certain disposals intended to lock in the previous lifetime allowance (primarily unconditional contracts entered into before Budget day which would not complete until after Budget day or certain connected party transactions seeking to lock in relief).
- Previously announced changes to Private Residence Relief will go ahead, with effect from April 2020, to reduce the final period exemption from 18 months to nine months. In addition Lettings Relief will be reformed so that it only applies where the owner is in shared-occupancy with the tenant. HMRC will consult on the detail of these changes.
- As previously announced, this Budget will introduce legislation, effective from April 2020, to require UK residents to make a return and make a payment on account in relation to a UK residential property disposal within 30 days of the completion date. These rules do not apply where the gain is not chargeable to CGT (for example where Private Residence Relief applies). This is in addition to the current rules for non-residents disposing of any UK property or land.
- The IHT nil rate threshold will remain frozen at £325,000 until April 2021.
- The previous plans to reduce Corporation Tax to 17% from 2020 were abolished and the current rate of 19% remains in place (and will also be in place for the year beginning 1 April 2021).
- The temporary extension to the annual investment allowance limit of £1m will continue until 31 December 2020. From 1 January 2021 the rate is reduced to £200,000.
- Structures and Buildings Allowance, which provides relief for construction costs, will be increased from April 2020 to provide an annual rate of 3% per annum on a straight line basis.
To read the full overview of the UK's 2020 Budget, please click here.
To see the Rates and Allowances tables from the UK's 2020 Budget, please click here.