The Budget is always met with slight trepidation, and this one was no different – especially given everything that has been going on with the coronavirus. Fortunately, it was a relatively positive affair with Chancellor Rishi Sunak announcing that he will “do what it takes” to steer the UK through the economical impact of the pandemic, beginning with investing £12 billion for immediate response. He’s also pledged an additional £18 billion for general public spending to help deal with the knock-on effects of the virus.
Still, the Budget wasn’t to everyone’s taste (not that it ever is) with some expressing uneasiness over Mr Sunak’s seemingly generous numbers and borrowing plans.
Some have even gone as far as to describe the Budget as the “biggest Treasury giveaway for nearly 30 years”. As far as Mr Sunak is concerned, however, borrowing more money is the “right economic thing to do”. Only time will tell if that’s the case. In the meantime, you need to establish how these latest announcements will affect you. To help with this, here are some of the key points from the Budget that could have a direct impact on your finances:
Instead of cutting Corporation Tax by 2% as was originally planned for April 2020, it will remain at 19% for the next financial year. All this means is that you won’t be saving any money in this area on your upcoming tax bills after all. Still, it could be worse; the Chancellor could have increased it.
Capital Gains Tax
You could, however, shave a few pounds off your Capital Gains Tax bill should you sell an asset or a share of an asset if it’s jointly owned. That’s because the annual exempt amount for individuals and personal representatives has risen to £12,300 for 2020/21. Trustees also benefit from an increase to £6,150 (minimum £1,230). On the flip side of the coin, the Capital Gains Tax Entrepreneurs’ Relief Lifetime Limit has been reduced from £10 million to just £1 million. This applies to all qualifying disposals made on or after 11 March 2020 and, in some cases, disposals made beforehand. If you’re unsure whether this impacts you, be sure to seek advice immediately. The chances are, though, it shouldn’t be a problem as the Chancellor is confident that as many as 80% of small business owners will be unaffected by the change.
If you own a practice, your Employment Allowance will be increased from £3,000 to £4,000 a year for 2020/21. Be aware, however, that it will be restricted to employers with an employer Class I National Insurance Contributions (NICs) bill below £100,000 in 2019/20.
National Insurance Contributions
The other aspect to be aware of is that both the primary threshold for Class I NICs (employee contributions) and Class 4 (self-employed contributions) with rise to £9,500 for 2020/21. For principals and associates alike, this will mean a small tax cut, which is always welcome news. Importantly, the secondary threshold (employer contributions) will not move in line with this, but instead will be £8,788 for the new tax year.
Pensions too will be affected as a result of this Budget, thankfully for the better. The first piece of good news is that the Lifetime Allowance for pension savings will be £1,073,100 for 2020/21 – in line with inflation – meaning you can save more for your retirement without incurring any charges. Secondly, the government announced that the two tapered Annual Allowance thresholds for pensions have been raised by £90,000, which brings the threshold income figure to £200,000 and the adjusted income figure to £240,000. For those of you that have been penalised in the past for earning more, this change will certainly make a difference. Lastly, the minimum Annual Allowance for high earners from April 2020 is £4,000 – a whopping six grand reduction from the previous Allowance of £10,000. Something to take into consideration when planning your pension contributions.
Other than that, you might be interested to know that the Annual Investment Limit for Junior Individual Savings Accounts (ISAs) and child trust funds will be £9,000 for 2020/21, which means you can put more away for loved ones. As for Business Rates, there are several reliefs worth noting, including a retail discount of 100% for properties with a rateable value below £51,000 in England, which will be expanded to include hospitality and leisure businesses. The Chancellor also announced that the £1,500 discount for office space used by local newspapers will be extended until 31 March 2025.
On a larger scale, Mr Sunak’s Budget addressed a number of key issues, but as far as your professional finances are concerned, there are few measures that will have a significant impact. For personalised advice and to discover more about recent taxation changes, contact financial experts Lansdell & Rose today.
For more information please visit www.lansdellrose.co.uk or call Lansdell & Rose on 020 7376 9333.