Rishi Sunak presented his first budget yesterday, where he was trying to provide a balance between supporting the economy through the COVID-19 pandemic, ending austerity whilst also trying to promote regional growth. Alongside the budget, the Bank of England delivered an unscheduled emergency rate cute from 0.75% to 0.25%. Excellent news for people taking out a mortgage, not so great news for individuals with savings.
Unsurprisingly, COVID-19 was at the top of Sunak’s agenda where his intentions are to provide some short-term financial measures ensuring the NHS has enough budget to cope as well as extending Statutory Sick Pay rules that affect millions of individuals. Hopefully this will have a more significant impact than no longer being able to buy toilet rolls!
Income Tax
Nothing interesting changed in this area, dividend allowances, saving allowances, income tax bands and income tax rates remained unchanged.
National Insurance
A little bit of excitement for individuals who are employed. The Class 1 National Insurance threshold increased from £8,632 to £9,500 from 6th April 2020, providing a potential National Insurance saving of £104 per annum.
Capital Gains Tax
The Capital Gains Tax allowance will increase next tax year from £12,000 to £12,600.
Entrepreneurs’ Relief Lifetime Limit
The lifetime limit on gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) has been reduced from £10 million to £1 million.
Fortunately, there are special provisions for those you have entered into contracts for disposals before the 11th March.
Inheritance Tax
The only change in this area is the increase in the Residential Nil Rate Band from £150,000 to £175,000. This means a married couple may be able to leave up to £1 million on death before paying any Inheritance Tax.
Corporation Tax
Corporation Tax remains at 19% rather than reducing to 17% as previously mentioned.
Pensions
Annual Allowance
The standard annual allowance for 2020/21 will remain at £40,000. However, both tapered annual allowance thresholds will be increased by £90,000. From 2020/21:
Threshold Income will be 200,000 (increased from £110,000)
Adjusted Income will be £240,000 (increased from £150,000)
For those with threshold income above £200,000 and an adjusted income above £240,000, their annual allowance will be tapered away by £1 for every £2 that their adjusted income exceeds £240,000 down to a minimum tapered annual allowance of £4,000. You will note this has been reduced from the current minimum tapered annual allowance of £10,000.
This means anyone with threshold income above £200,000 and adjusted income of at least £312,000 would have a tapered annual allowance of £4,000 next tax year.
Lifetime Allowance
The standard lifetime allowance will increase from £1,055,000 to £1,073,100 in 2020/21. This has been increased in line with CPI.
Inheriting a State Pension from an opposite sex civil partner
The Civil Partnerships (Opposite-sex Couples) Regulations 2019 gave opposite-sex couples the choice of entering into a marriage or a civil partnership.
The Budget provides funding to ensure that opposite-sex individuals who enter into a civil partnership can derive, or inherit, a State Pension from their (opposite-sex) civil partner.
ISAs
The adult ISA annual subscription limit for 2020-21 remains unchanged at £20,000. The Junior ISA limit has significantly increased from £4,368 to £9,000.
Non-UK resident Stamp Duty Land Tax surcharge
A 2% surcharge on non-UK residents purchasing residential property in England and Northern Ireland will be introduced from 1st April 2021. This is in addition to the standard stamp duty rates as well as the 3% surcharge introduced for second homes and buy to let properties.
We thought it would also be useful to summarise some other, non-personal tax related, outcomes from yesterday’s budget:
– Duties on spirits, beer, cider and wine is to be frozen
– VAT on digital publications, including newspapers, e-books and academic journals to be scrapped from December. This is some good news for all the online readers.
– 5% VAT on women’s sanitary products, known as the tampon tax, will be scrapped. Finally!
– Sunak also plans to introduce a plastic packaging tax is being introduced from April 2022. He intends to charge manufacturers and importers £200 per tonne on packaging made of less than 30% recycled plastic.
If you have any questions regarding how this years’ budget may affect your personal circumstance, do not hesitate to contact us.
Please note: This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, nor can anything stated be considered a personal recommendation
