BUDGET HIGHLIGHTS

• The Chancellor announced a £12 billion “temporary, timely and targeted” coronavirus stimulus on top of an £18 billion increase in general public spending, but tax measures were relatively few.
• The pension annual allowance thresholds will each be increased by £90,000 from 2020/21, removing taper as an issue for most people with incomes under £200,000.
• The capital gains tax entrepreneurs’ relief lifetime limit has been cut from £10 million to £1 million with immediate effect.
• The annual investment limit for Junior ISAs and child trust funds will be increased to £9,000 from 2020/21.
• The national insurance contributions employment allowance will increase from £3,000 to £4,000 from April 2020.
• There will be a review of the taxation of funds to make the UK more attractive for fund management. It will also consider the VAT treatment of fund management fees.
• From April 2021, only zero-emission vehicles will get 100% first-year allowances. Cars with emissions up to 50g/km will have an 18% a year writing down allowance; for higher emitters, the allowance will be 6% a year.
• From April 2022, red diesel (and rebated biofuels) will only be available to users for agriculture, rail and non-commercial heating.
• E-publications (e-books, e-newspapers, e-magazines and academic e-journals) will be VAT zero-rated from 1 December 2020.

CONTENTS

Budget highlights	1	Business taxes	11
Introduction	2	Value added tax	15
Personal taxation	3	Tax avoidance and evasion	17
Pensions, savings and investments	7	National insurance contributions	19
Capital taxes	9

@ Copyright 11 March 2020. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION

“….get it done” was a recurrent phrase in the Budget speech of the new Chancellor, Rishi Sunak. It could equally have been “get it spent” or “get it borrowed” as Mr Sunak announced a raft of spending initiatives with few supporting tax increases.

His performance did not follow the standard playbook for the first Budget after a general election. Such set pieces have generally been when a Chancellor takes advantage of his distance from the next visit to the polls to deliver the bitter medicine of tax rises. However, with the threat to the global economy caused by the coronavirus pandemic, these were not normal times. The Office for Budget Responsibility (OBR) was expected to cut projected UK economic growth even before the virus emerged. Its pre-measures forecasts were all closed by 25 February, meaning that the coronavirus effect was “largely confined to a modestly weaker outlook for growth in world trade and the UK’s export markets”.

Mr Sunak had the benefit of seeing what happened since that date and clearly decided that the medicine required was a large dose of tonic, rather than tax. He announced a total package of fresh spending for 2020/21 of £30 billion, of which £12 billion was directly attributed to countering the impact of coronavirus on the UK economy and NHS finances.

Total government borrowing was increased for the next five years by over £110 billion as a result of decisions taken in this Budget. But this is not the end of the story, as another Budget is due in the autumn. By then the consequences of coronavirus should be clearer and we may see other topics addressed, such as inheritance tax reform, which were understandably put on hold this time around.

PERSONAL TAXATION

Main personal allowances and reliefs		2020/21	2019/20
Personal allowance1		£12,500	£12,500
Married couple’s/civil partner’s transferable allowance		£1,250	£1,250
Married couple’s/ civil partner’s allowance at 10%2 (if at least one born before 6/4/35)	maximum minimum	£9,075 £3,510	£8,915 £3,450
Blind person’s allowance		£2,500	£2,450
Rent-a-room tax-free income		£7,500	£7,500
Registered pension schemes
• Lifetime allowance		£1,073,100	£1,055,000
• Annual allowance3		£40,000	£40,000
• Money purchase annual allowance		£4,000	£4,000

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
2 Reduced by £1 for every £2 of adjusted net income over £30,200 (£29,600 for 2019/20), until the minimum is reached.
3 Reduced by £1 for every £2 of adjusted income over £240,000 (£150,000 for 2019/20) to a minimum of £4,000 (£10,000 for 2019/20), subject to threshold income being over £200,000 (£110,000 for 2019/20).

Income tax rates and bands		2020/21	2019/20
UK taxpayers’ excluding Scottish taxpayers’ non-savings income
20% basic rate on the first slice of taxable income up to		£37,500	£37,500
40% higher rate on next slice of taxable income over		£37,500	£37,500
45% additional rate on taxable income over		£150,000	£150,000
All UK taxpayers
Starting rate at 0% – on the band of savings income up to4		£5,000	£5,000
Personal savings allowance at 0%:	basic rate taxpayers	£1,000	£1,000
	higher rate taxpayers	£500	£500
	additional rate taxpayers	£0	£0
Dividend allowance at 0% tax – all individuals		£2,000	£2,000
Tax rates on dividend income:	basic rate taxpayers	7.5%	7.5%
	higher rate taxpayers	32.5%	32.5%
	additional rate taxpayers	38.1%	38.1%
4 Not available if taxable non-savings income exceeds the starting rate band.

Scottish taxpayers’ non-dividend, non-savings income	2020/21	2019/20
19% starter rate on taxable income up to	£2,085	£2,049
20% basic rate on next slice up to	£12,658	£12,444
21% intermediate rate on next slice up to	£30,930	£30,930
41% higher rate on next slice up to	£150,000	£150,000
46% top rate on income over	£150,000	£150,000

Trusts	2020/21	2019/20
Standard rate band generally	£1,000	£1,000
Dividends (rate applicable to trusts)	38.1%	38.1%
Other income (rate applicable to trusts)	45%	45%

High income child benefit charge: 1% of benefit per £100 adjusted net income of £50,000 – £60,000.

PERSONAL TAXATION

Income tax

The personal allowance will remain at £12,500 and the higher rate threshold will stay at £50,000 for 2020/21, as announced in the 2018 Budget. In Scotland, the higher rate threshold for non-savings, non-dividend income will also be unchanged at £43,430.

Off-payroll working (IR35)

From April 2020 the responsibility for operating the off-payroll working rules in the private and third sectors will move from individual workers to the organisation, agency or other third party engaging them. The change applies to services carried out from 6 April 2020.

Car benefit

The car benefit scale charge percentages for 2020/21 will be restructured, taking account of the recently introduced Worldwide Harmonised Light Vehicle Test Programme (WLTP) emissions standards. The scales for 2020/21 are as follows:

All zero CO₂ emission vehicles: 0%

Petrol and diesel hybrids with CO₂ emissions 1-50g/km

Range – electric-only miles	< 30	30 – 39	40 – 69	70 – 129	130 +
Registered pre-6/4/20 (NEDC)	14%	12%	8%	5%	2%
Registered post-5/4/20 (WLTP)	12%	10%	6%	3%	0%

All non-diesel cars over 50 g/km CO2	51-54	55 & over
Registered pre-6/4/20 (NEDC)	15%	16%*-37%
Registered post-5/4/20 (WLTP)	13%	14%*-37%
All diesels that do not meet RDE2 standards: add 4% to the above, subject to a maximum 37% scale charge.

*Increased for every extra 5g/km by 1% up to the maximum 37%

The rates will increase by 1% in 2021/22 and a further 1% in 2022/23 before being frozen until 2024/25.

Increasing the flat rate deduction for homeworking

From April 2020 the maximum flat rate income tax deduction available to employees to cover additional household expenses will increase from £4 per week to £6 per week, where they work at home under homeworking arrangements.

Tax treatment of welfare counselling provided by employers

The scope of non-taxable counselling services will be extended from April 2020 to include related medical treatment when it is provided to an employee as part of an employer’s welfare counselling services.

Employment allowance

The employment allowance will be increased from £3,000 to £4,000 a year for 2020/21, as previously announced. But it will be restricted to employers with an employer Class 1 national insurance contributions (NICs) bill below £100,000 in 2019/20.

National insurance contributions

The primary threshold (employee contributions) for Class 1 NICs and the lower profits limit for Class 4 NICs will rise to £9,500 for 2020/21, as announced in January 2020. However, the secondary threshold (employer contributions) will not move in parallel, but instead it will increase to £8,788.

---

SAVER

Don’t lose your personal allowance. Your personal allowance of £12,500 in 2020/21 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.

---

PENSIONS, SAVINGS AND INVESTMENTS

Tapered annual allowance for pensions 

The two tapered annual allowance thresholds for pensions will each be raised by £90,000 from 2020/21. The ‘threshold income’ figure will therefore be £200,000 and the ‘adjusted income’ figure will be £240,000. This will help many people, such as medical consultants, who have faced large tax bills on extra pay. While the rate of taper is unchanged, the minimum annual allowance for the highest earners from April 2020 will be reduced from £10,000 to £4,000 ­– at an ‘adjusted income’ of £312,000 or more.

Lifetime allowance for pensions 

The lifetime allowance for pension savings will increase to £1,073,100 for 2020/21, in line with inflation.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2020/21 will remain at £20,000. However, the annual subscription limit for Junior ISAs (JISAs) and child trust funds (CTFs) will more than double, from £4,368 to £9,000.

Top slicing relief on life insurance policy gains

In response to the Silver First-Tier Tribunal case, the legislation will specify how allowances and reliefs must be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020.

Review of the UK funds regime

A review of the UK funds regime will be undertaken during 2020, covering direct and indirect tax, as well as relevant areas of regulation. A consultation paper will examine whether there are “targeted and merited” tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK funds regime. 

Call for evidence on pension tax administration

Depending on how their pension scheme administers tax relief, people earning around or below the level of the personal allowance may or may not benefit from a top-up on their pension savings equivalent to the basic rate of tax.

A review of the options for addressing the differences will begin shortly with a call for evidence on pensions tax relief administration.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The venture capital limits and reliefs remain unchanged, as detailed below.

Venture capital allowances and reliefs	2020/21	2019/20
Venture capital trust at 30%	£200,000	£200,000
Enterprise investment scheme at 30%1	£2,000,000	£2,000,000
– EIS eligible for capital gains tax deferral relief	No limit	No limit
Seed EIS (SEIS) at 50%	£100,000	£100,000
– SEIS capital gains tax reinvestment relief	50%	50%

¹ Investment above £1,000,000 must be in knowledge-intensive companies

---

THINK AHEAD

The pension lifetime allowance will rise by £18,100 from 6 April 2020. If you plan to draw from your pensions and already have funds exceeding the current £1,055,000 lifetime allowance limit, you may want to wait before taking your pension benefits.

---

THINK AHEAD

The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2019/20 and 2020/21 – use it or lose it.

---

CAPITAL TAXES

Capital gains tax (CGT): annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,300 for 2020/21, while the amount for most trustees will increase to £6,150 (minimum £1,230).

Entrepreneurs’ relief

For disposals on or after 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief, which offers a reduced 10% rate of CGT on qualifying disposals, will be reduced from £10 million to £1 million. There will be rules that apply to forestalling arrangements entered into before Budget day.

Private residence relief

From 6 April 2020, lettings relief of up to £40,000 will only apply where the owner of the property shares occupancy with the tenant. The final period exemption for CGT will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or people in a care home.

Inheritance tax (IHT)

The IHT nil rate band will remain at £325,000 for 2020/21.

The residence nil rate band (RNRB) will increase to £175,000 from 6 April 2020, as set out in existing legislation.

Non-UK resident stamp duty land tax (SDLT) surcharge

A 2% SDLT surcharge will be introduced from 1 April 2021 for non-UK residents purchasing residential property in England and Northern Ireland.

Annual tax on enveloped dwellings (ATED)

The ATED for 2020/21 will be increased in line with inflation.

Property value	Charge for tax year 2020/21	Charge for tax year 2019/20
More than £500,000 but not more than £1m	£3,700	£3,650
More than £1m but not more than £2m	£7,500	£7,400
More than £2m but not more than £5m	£25,200	£24,800
More than £5m but not more than £10m	£58,850	£57,900
More than £10m but not more than £20m	£118,050	£116,100
More than £20m	£236,250	£232,350

---

THINK AHEAD

IHT simplification remains on the agenda. Now maybe a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.

---

BUSINESS TAXES

Corporation tax rate

The rate of corporation tax will remain at 19% and will not fall to 17% in 2020, as had been planned.

Structures and buildings allowance

The annual rate of capital allowances for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%, from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Research and development (R&D)

The rate of R&D expenditure credit will increase from 12% to 13% from 1 April 2020.

The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.

The introduction of the PAYE cap on the payable tax credit in the R&D schemes for SMEs will be delayed until 1 April 2021, following consultation last year. There will be further consultation on changes to the cap’s design to ensure it targets abusive behaviour, while also ensuring that eligible businesses can access the relief.

First year allowances for business cars

Only zero-emission vehicles will qualify for first-year allowances from April 2021. The main rate of writing down allowance (WDA) of 18% will be given for cars with emissions up to 50g/km. The 6% WDA rate will apply to cars with emissions above 50g/km. First-year allowances for zero-emission goods vehicles and natural gas and hydrogen refuelling equipment will be extended until 2025.

Corporate capital loss restriction

The proportion of annual capital gains that can be relieved by brought forward capital losses will be restricted to 50% from 1 April 2020, on similar lines to the corporate income loss rules. An allowance will give companies unrestricted use of up to £5 million capital and/or income losses each year. Certain companies in liquidation will be excluded from the scope of the restriction.

Non-UK resident companies with UK property income

Non-UK resident companies will be charged corporation tax on their UK property income from 6 April 2020, under legislation enacted in Finance Act 2019. Further legislation will ensure these rules work as intended to provide a smooth transition of the taxation of UK property profits from income tax to corporation tax.

Digital services tax

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online marketplaces, where those activities are linked to the participation of UK users and will be subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss makers and reduce the effective rate of tax on businesses with very low profit margins.

Private use of company vehicles

The fuel multiplier for 2020/21 will be £24,500 for cars. For vans, the fuel chargeable amount will be £666.

For zero-emission vans, the van benefit charge will be nil from April 2021.

From 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with the consumer prices index (CPI) rather than the retail price index (RPI).

Intangibles

The pre-2002 exclusion from the Intangible Fixed Assets regime will be removed. This means that tax relief for the cost of acquiring corporate intangible assets from 1 July 2020 will be provided under a single regime subject to restrictions to prevent tax avoidance.

Business rates

The Budget included several reliefs from business rates, some of them temporary in response to coronavirus.

• The retail discount for properties with a rateable value below £51,000 in England will be increased to 100% for 2020/21 and will be expanded to include hospitality and leisure businesses for 2021.
• There will be a discount of £5,000 for pubs in England with a rateable value below £100,000 for one year from 1 April 2020.
• The £1,500 discount for office space used by local newspapers in England will be extended until 31 March 2025.
• A fundamental review of business rates will call for evidence in the spring and report in the autumn.

Time to Pay

Tailored arrangements will be available to give a business the time it needs to pay HMRC. The aim is to support the business’s recovery while operating through any temporary financial challenges that occur, for example as a result of the coronavirus pandemic. HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties because of coronavirus in trying to contact HMRC or pay taxes.

Enterprise management incentives (EMI) scheme

The EMI scheme will be reviewed to ensure it provides support for high-growth companies to recruit and retain the best talent.

Plastic packaging tax

A new tax will be introduced from April 2022 to incentivise the use of recycled plastic in packaging. The rate will be £200 per tonne of plastic packaging that contains less than 30% recycled plastic. It will apply to the production and importation of plastic packaging.

Red diesel

The entitlement to use red diesel and rebated biofuels will be removed from April 2022 except for agriculture (including horticulture, pisciculture and forestry), rail and non-commercial heating.

Tax guidance for self-employed people

To make it easier for self-employed individuals to navigate the tax system, the government will this summer launch new interactive online guidance for taxpayers with non-PAYE income.

---

THINK AHEAD

Your business might be entitled to valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.

---

THINK AHEAD

If you want to take advantage of Time to Pay, make sure that you have adequate records to justify your claim to HMRC.

---

THINK AHEAD

Company car tax rules change from 6 April 2020. Make certain you – and anyone you employ – are aware of the consequences.

---

VALUE ADDED TAX

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022. The deregistration threshold will stay at £83,000 for the same period.

E-publications

The zero-rate of VAT on printed books, newspapers, magazines and academic journals will be extended to their electronic counterparts from 1 December 2020. The government will consult on the details of the legislation ahead of its implementation.

Postponed accounting

Postponed accounting for VAT will apply from 1 January 2021 to all imports of goods, including from the EU. The measure is aimed at helping VAT-registered UK businesses that are integrated in international supply chains as they adapt to the UK’s position outside the EU.

VAT on call-off stock

Simplified rules will be introduced for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called off. The legislation will be backdated to goods removed from a Member State on or after 1 January 2020.

Long-term cross-border goods policy

The government will consult informally with stakeholders on the VAT treatment of goods crossing UK borders after the EU exit transition period.

Women’s sanitary products

The zero rate of VAT will be charged on tampons and other women’s sanitary products from 1 January 2021.

Agricultural flat rate scheme

New entry and exit rules for the agricultural flat rate scheme will be introduced from 1 January 2021. Businesses will be able to join the scheme when their annual turnover for farming-related activities is below £150,000.

They must deregister from it once such turnover exceeds £230,000 and register for VAT instead. Businesses with a turnover that exceeds £85,000 for non-farming activities will be ineligible for the scheme and will have to register for VAT.

---

SAVER

The flat rate VAT scheme for small businesses can save some traders money and administration costs. Take advice on whether it is right for you, as some businesses pay more VAT under the scheme.

---

THINK AHEAD

VAT rules on cross-border trading may change after the EU exit transition period. Take advice periodically on how exit from the EU might affect your business.

---

TAX AVOIDANCE AND EVASION

Construction Industry Scheme (CIS) abuse

The legislation will be introduced in the Finance Bill 2020-21 to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The government is also launching a consultation that considers options on how to promote due diligence in the supply chain.

A domestic reverse charge for building and construction services

The implementation of the VAT domestic reverse charge for building and construction services will be delayed until 1 October 2020, as previously announced.

Conditionality for granting business licences

Legislation in Finance Bill 2020-21 will make the renewal of licences to drive taxis and private hire vehicles (PHVs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. This measure will take effect in England and Wales in April 2022. The government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect.

In the spring a discussion document will be issued seeking views on the wider application of tax conditionality.

Loan charge

The forthcoming Finance Bill will legislate to implement the recommendations of the Independent Loan Charge Review that the government has accepted. A call for evidence on further action to stamp out disguised remuneration schemes will be issued shortly.

HMRC’s promoter strategy

HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes in addition to the legislative changes in Finance Bill 2020-21.

A call for evidence will be published in the spring about raising standards for tax advice.

Large business notification

From April 2021 large businesses will be required to notify HMRC when they take a tax position that HMRC is likely to challenge.

Clarifying the treatment of Limited Liability Partnership (LLP) returns

The government will legislate prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules.

Money laundering levy

The government intends to introduce a levy to be paid by firms subject to the Money Laundering Regulations to help fund new action to tackle money laundering. A consultation on the levy will be published later this spring.

Stamp duty and stamp duty reserve tax – transfer of unlisted securities to connected companies 

The targeted market value rule is intended to prevent the artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company. The rule is being extended to unlisted shares. The measure will be in Finance Bill 2020. As part of this change, the government will amend legislation to prevent a double tax charge arising on certain company reorganisations.

NATIONAL INSURANCE CONTRIBUTIONS

Class 1 (Employees)	2020/21		2019/20
	Employee	Employer	Employee	Employer
NIC rate	12%	13.8%	12%	13.8%
No NICs for younger employees1 on the first	£183 pw	£962 pw	£166 pw	£962 pw
No NICs for employees generally on the first	£183 pw	£169 pw	£166 pw	£166 pw
NICs rate charged up to	£962 pw	No limit	£962 pw	No limit
2% NICs on earnings over	£962 pw	N/A	£962 pw	N/A

¹ Employees generally under 21 years and apprentices under 25 years.

Employment allowance	2020/21	2019/20
Per business – not available if the sole employee is a director or employer’s NICs for 2019/20 £100,000 or more.	£4,000	£3,000

Earnings limits or thresholds	2020/21		2019/20
	Weekly	Annual	Weekly	Annual
Lower earnings limit	£120	£6,240	£118	£6,136
Primary threshold	£183	£9,500	£166	£8,632
Secondary threshold	£169	£8,788	£166	£8,632
Upper earnings limit (and upper secondary thresholds)2	£962	£50,000	£962	£50,000

² Employees generally under 21 years and apprentices under 25 years.

Class 1A (Employers)	2020/21	2019/20
On car and fuel benefits and most other taxable benefits provided to employees and directors	13.8%	13.8%
Class 2 (Self-employed)	2020/21	2019/20
Flat rate	£3.05 pw £158.60 pa	£3.00 pw £156.00 pa
Small profits threshold: No compulsory NICs if profits do not exceed	£6,475 pa	£6,365 pa
Class 4 (Self-employed)	2020/21	2019/20
On annual profits of	£9,500 – £50,000: 9%	£8,632 – £50,000 9%
	Over £50,000: 2%	Over £50,000: 2%
Voluntary	2020/21	2019/20
Class 3 flat rate	£15.30 pw £795.60 pa	£15.00 pw £780.00 pa

2018 BUDGET SUMMARY CONTENTS

 

Budget highlights	1	Business taxes	8
Introduction	2	Property taxes	11
Personal taxation	3	Value added tax	12
Pensions, savings and investments	5	Avoidance, evasion and unfair outcomes	13
Capital taxes	6	National insurance contributions	16

@ Copyright 29 October 2018. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION 

“…austerity is coming to an end – but discipline will remain” were the words the Chancellor, Philip Hammond, used to summarise his October Budget speech. That balance between continued cuts and excessive borrowing was evident in the measures announced today. The Office for Budget Responsibility (OBR) forecast that borrowing in 2018/19 will be £11.6 billion less than it forecast in March. But the Chancellor’s net tax giveaway for 2019/20 was only marginally higher at £15.1 billion, rising to over £30.5 billion by 2023/24. A large slice of that apparent generosity is down to increased NHS expenditure, which starts at £7.35 billion in 2019/20, rising to £27.6 billion by 2023/24.

Mr Hammond was helped by the OBR increasing growth forecasts for the next two years, although it left the 2018 figure unchanged at 1.3%. A good example of Mr Hammond’s balanced approach was bringing forward the £50,000 higher rate threshold and £12,500 personal allowance to 2019/20 rather than 2020/21, as originally promised in the 2017 Conservative manifesto. Accelerating these changes only gives rise to a one-year cost because the personal allowance and higher rate threshold will be frozen in 2020/21.

Several other headline-grabbing measures also have a temporary effect on closer examination. The one-third cut to business rates for some retail properties will last for just two years, as will the increase in the annual investment allowance (AIA) to £1 million.

The rosier outlook from the OBR might change by the time the Chancellor is next due to present a fiscal set piece – his Spring Statement. As he said in his speech, he was “reserving the right to upgrade the Spring Statement to a full fiscal event” if “the economic or fiscal outlook changes materially in-year”.

PERSONAL TAXATION

Main personal allowances and reliefs		2019/20	2018/19
Personal allowance1		£12,500	£11,850
Married couples’ / civil partner’s transferable allowance		£1,250	£1,190
Married couples’/ civil partners’ allowance at 10%2 (if at least one born before 6/4/35)	maximum	£8,915	£8,695
	minimum	£3,440	£3,360
Blind person’s allowance		£2,450	£2,390
Rent-a-room tax-free income		£7,500	£7,500
Registered pension scheme
·         Lifetime allowance		£1,055,000	£1,030,000
·         Money purchase annual allowance		£4,000	£4,000
·         Annual allowance3		£40,000	£40,000

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.

2 Reduced by £1 for every £2 of adjusted net income over £29,600 (£28,900 for 2018/19), until the minimum is reached.

3 Subject to 50% taper down to £10,000 if threshold income is over £110,000 and adjusted income is over £150,000.

Scottish taxpayers’ non-dividend, non-savings income5	2019/20	2018/19
19% starter rate on income up to	TBA	£2,000
20% basic rate on next slice of income up to	TBA	£12,150
21% intermediate rate on next slice up to	TBA	£31,580
41% higher rate on next slice up to	TBA	£150,000
46% top rate on income over	TBA	£150,000

Income tax rates and bands
UK excluding Scottish taxpayers’ non-savings income		2019/20	2018/19
20% basic rate on income up to		£37,500	£34,500
40% higher rate on income over		£37,500	£34,500
45% additional rate on income over		£150,000	£150,000
All UK taxpayers
Starting rate at 0% on savings income up to4		£5,000	£5,000
Savings allowance at 0% tax:	basic rate taxpayers	£1,000	£1,000
	higher rate taxpayers	£500	£500
	additional rate taxpayers	£0	£0
Dividend allowance at 0% tax – all individuals		£2,000	£5,000
Tax rates on dividend income:	basic rate taxpayers	7.5%	7.5%
	higher rate taxpayers	32.5%	32.5%
	additional rate taxpayers	38.1%	38.1%
4 Not available if taxable non-savings income exceeds the starting rate band.

 

5 To be announced – Scottish Budget to be published on 12 December 2018.

 

Trusts                                                                            2019/20            2018/19

Standard rate band generally                                       £1,000               £1,000

Dividends (rate applicable to trusts)                            38.1%                38.1%

Other income (rate applicable to trusts)                       45%                   45%

Child benefit charge: 1% of benefit per £100 of income between £50,000 and £60,000.

PERSONAL TAXATION

Income tax

The personal allowance will increase to £12,500 and the higher rate threshold will rise to £50,000 for 2019/20. From 2021/22, the personal allowance and higher rate threshold will increase in line with inflation. The Scottish tax bands and rates for non-savings, non-dividend income will be announced in the Scottish Budget, due on 12 December.

---

saver

Don’t lose your personal allowance. Your personal allowance of £12,500 in 2019/20 is reduced by 50p for every pound that your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.

---

Off-payroll working in the private sector

Following consultation and the roll-out of reform in the public sector, responsibility for

operating the off-payroll working rules in the private sector will move from individuals to the organisation, agency or other third party engaging the worker. The change will take effect from April 2020, with an exemption for small organisations.

Rent-a-room relief

Following consultation, there will be no new ‘shared occupancy test’ for rent-a-room relief and the existing qualifying test of letting in a main or only residence will remain.

Employment allowance

From April 2020, the employment allowance of £3,000 a year will be restricted to employers with an employer national insurance contributions (NICs) bill below £100,000 in their previous tax year.

National insurance contributions

As announced in September, Class 2 NICs will not be abolished during this Parliament. Reforms to the treatment of termination payments and income from sporting testimonials will be legislated for in the National Insurance Contributions Bill, with changes taking effect from April 2020.

Car benefit scale

The petrol car benefit charge for 2019/20 is based on CO₂ emissions in grams per kilometre and the car’s list price when new. For diesel vehicles, add 3% to the scale up to 37% maximum. The scale for 2019/20 is as follows:

CO2 g/km	0-50	51-75	76-94	95 and above
Charge	16%	19%	22%	23% + 1% for each extra 5g/km over 95g/km up to max. 37%

Short-term business visitors

Eligibility for the special PAYE tax and administrative treatment of short-term business visitors from overseas branches of UK-headquartered companies will be widened from April 2020, and the deadlines for reporting and paying tax will be extended.

PENSIONS, SAVINGS AND INVESTMENTS

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2019/20 will remain at £20,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2019/20 will rise to £4,368.

Lifetime allowance for pensions

The lifetime allowance for pension savings will increase to £1.055 million for 2019/20. There is no change to the annual allowances.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The rules for approved EIS funds will be amended to require approved funds to focus on knowledge-intensive companies with effect from April 2020. The funds will also have a longer period in which to invest capital. Investors in these funds will be allowed to set this income tax relief against their liabilities in the year before the fund closes.

The venture capital limits and reliefs remain unchanged, as detailed below.

Venture capital allowances and reliefs                                                                  2019/20            2018/19

Venture capital trust at 30%                          £200,000          £200,000

Enterprise investment scheme at 30%1      £2,000,000       £2,000,000

– EIS eligible for capital gains tax deferral relief No limit            No limit

Seed EIS (SEIS) at 50%                                   £100,000          £100,000

– SEIS capital gains tax reinvestment relief                                                                                                                                               50%                    50%

¹ Investment above £1,000,000 must be in knowledge-intensive companies

Pensions for the self-employed

This winter the Department for Work and Pensions will publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed. The paper will focus on expanding evidence through a programme of targeted interventions and partnerships.

---

think ahead

The lifetime allowance will rise by £25,000 from 6 April 2019. If you plan to draw from your pensions and already have funds exceeding the current £1.03 million lifetime allowance limit, you may want to wait before taking your pension benefits.

---

think ahead

The dividend allowance and personal savings allowance will be frozen for 2019/20. Your ISA allowance is £20,000 in 2018/19 and 2019/20.

---

CAPITAL TAXES

Capital gains tax: annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,000 for 2019/20, while the amount for most trustees will increase to £6,000 (minimum £1,200).

Entrepreneurs’ relief

From 6 April 2019, the minimum period throughout which the qualifying conditions for the relief must be met will increase from 12 to 24 months.

From 29 October 2018, shareholders claiming entrepreneurs’ relief must be entitled to at least 5% of the distributable profits and net assets of a company, in addition to the current requirements on share capital and voting rights.

As announced at the 2017 Autumn Budget, individuals can qualify for entrepreneurs’ relief where their shareholding is diluted below the 5% qualifying threshold by fund-raising events after 5 April 2019.

Private residence relief

From April 2020, lettings relief will only apply where the owner of the property is in shared occupancy with the tenant.

The final period exemption will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or to those in a care home.

Inheritance tax (IHT)

The IHT nil rate band remains at £325,000 for 2019/20.

The residence nil rate band (RNRB) will increase to £150,000 from 6 April 2019 as already legislated. From 29 October 2018, minor technical amendments to the RNRB will take effect relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes.

---

think ahead

IHT simplification is on the agenda. Now may be a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.

---

BUSINESS TAXES

Corporation tax rate

The government has confirmed that the rate of corporation tax will fall to 17% in 2020.

Annual investment allowance

The AIA will be increased from £200,000 to £1 million for all qualifying investments in plant and machinery from 1 January 2019 until 31 December 2020.

Special rate writing down allowance

The capital allowances special rate for qualifying plant and machinery, such as long-life assets, will be reduced from 8% to 6% from April 2019.

Structures and buildings allowance

A 2% capital allowance will apply to qualifying capital expenditure on new non-residential buildings and structures where all the contracts for the physical construction works are entered into on or after 29 October 2018. Relief will not be available for the costs of land or dwellings.

Corporate losses

The tax treatment of corporate capital losses will be brought into line with the treatment of income losses from 1 April 2020. The proportion of annual capital gains that can be relieved by brought-forward capital losses will be limited to 50%. However, companies will have unrestricted use of up to £5 million capital or income losses each year.

Amendments will be made to the existing loss relief legislation to ensure that it works as intended and prevents relief being claimed for excessive carried-forward losses.

Digital services tax

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online market places where those activities are linked to the participation of UK users, subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss-makers and reduce the effective rate of tax on businesses with very low profit margins.

Company vehicles

Fuel benefit charges will increase in line with the retail prices index (RPI) and the van benefit charge will increase in line with the CPI from 6 April 2019. The fuel multiplier for 2019/20 will be £24,100 for cars. For vans, the fuel chargeable amount will be £655.

Intangible fixed assets regime

A targeted relief will be introduced from April 2019 for the cost of goodwill in the acquisition of businesses with eligible intangible property. With effect from 7 November 2018, a de-grouping charge will not arise where the de-grouping is the result of a share disposal that qualifies for the substantial shareholding exemption.

Offshore receipts in respect of intangible property

From April 2019, income from intangible property held in low-tax jurisdictions will be taxed to the extent that it can be referred to UK sales. The tax will be collected by directly taxing offshore entities that realise intangible property income in low-tax jurisdictions. There will be a de minimis UK sales threshold of £10 million and exemptions for income that is taxed at appropriate levels or supported by sufficient local substance.

Enhanced capital allowances (ECAs)

The ECA for companies investing in electric vehicle charge points will be extended to 31 March 2023. ECAs and first-year tax credits for technologies on the Energy Technology List and Water Technology List will end in April 2020. The savings will be reinvested in an Industrial Energy Transformation fund to support significant energy users to cut their energy bills and move UK industry to a low-carbon future.

Charity taxes

The upper limit for trading that charities can carry out without incurring a tax liability will rise from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000.

Charity shops using the Retail Gift Aid Scheme will be allowed to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year.

The individual donation limit under the Gift Aid Small Donations Scheme will increase from £20 to £30. This applies to small collections where it is impractical to obtain a Gift Aid declaration.

These changes will take effect from April 2019.

Plastic packaging

A tax on the production and import of plastic packaging will be introduced in April 2022. Subject to consultation, it will apply to plastic packaging that does not contain at least 30% recycled plastic. The Packaging Producer Responsibility System will be reformed to provide an incentive for producers to design packaging that is easier to recycle and penalise the use of difficult to recycle packaging, such as black plastics.

Apprenticeship levy

Levy-paying employers will be able to transfer up to 25% of their funds to pay for apprenticeships training in their supply chains.

The co-investment rate for apprenticeship levy will halve to 5%.

---

think ahead

Your business might be entitled to a valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.

---

think ahead

Automatic enrolment pension minimum contributions increase significantly again from 6 April 2019. Make certain you – and anyone you employ – are aware of the consequences.

---

 PROPERTY TAXES

Business rates – retail

Business rates bills will be reduced for two years from April 2019 by one-third for retail properties with a rateable value below £51,000, subject to state aid limits. This will benefit up to 90% of retail properties.

Business rates – self-catering and holiday let accommodation

The government will consult on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax.

Business rates – public lavatories

A 100% business rates relief will be introduced for all public lavatories to help keep these amenities open.

Stamp duty land tax (SDLT)

First-time buyers’ relief in England and Northern Ireland will be extended so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. The change will apply to transactions with an effective date of 29 October 2018 and will also be backdated to 22 November 2017.

The government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

Non-UK residents’ gains

Gains that accrue to non-UK residents on non-residential property will be subject to tax. Non-UK residents will also be subject to tax on gains in diversely-held companies, those widely-held funds not previously included, and life assurance companies. They will also be taxed on gains on interests in UK property-rich entities, such as shares in companies that derive at least 75% of their value from UK land. The measures which have been previously announced will take effect for disposals made after 5 April 2019 and there will be an anti-forestalling rule for arrangements entered into after 21 November 2017.

Annual tax on enveloped dwellings

The annual tax on enveloped dwellings (ATED) for 2019/20 will be increased in line with inflation, as detailed in the table below:

Property value	Charge for tax year 2018/19	Charge for tax year 2019/20
More than £500,000 but not more than £1m	£3,600	£3,650
More than £1m but not more than £2m	£7,250	£7,400
More than £2m but not more than £5m	£24,250	£24,800
More than £5m but not more than £10m	£56,550	£57,900
More than £10m but not more than £20m	£113,400	£116,100
More than £20m +	£226,950	£232,350

---

think ahead

Three-quarters of any interest tax relief for personal buy-to-let borrowing will be limited to a 20% tax credit from 2019/20. Make sure you understand the impact of this latest change on your overall tax position.

---

think ahead

From 6 April 2020, CGT on residential property will be payable within 30 days of sale. If you are thinking of selling buy-to-let property, the existing rules can give you up to almost 21 months before any tax bill arrives.

---

VALUE ADDED TAX

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022, two years longer than previously announced. The deregistration threshold will stay at £83,000 for the same period. The government will look again at the possibility of introducing a smoothing mechanism once the terms of Brexit are clear.

Vouchers

The Finance Bill 2018-19 will implement EU legislation to ensure that the correct amount of VAT is charged on what the customer pays, irrespective of whether payment is with a voucher or by other means.

Labour provision in the construction sector

A VAT domestic reverse charge will be introduced to prevent VAT losses through ‘missing trader’ fraud when traders collect VAT on their sales but go missing before passing the VAT onto HMRC. The new rules will shift responsibility for paying VAT along the supply chain and will take effect from 1 October 2019.

Alternative method of VAT collection

The government is considering a ‘split payment’ model to reduce online VAT fraud by third country sellers and to improve how VAT is collected on cross-border e-commerce. An industry working group will be established to address some of the main challenges associated with this policy.

---

think ahead

Making Tax Digital (MTD) will start to apply to VAT for certain businesses from 1 April 2019. Consider taking advice on how you are affected and what your options are to deal with this major change.

---

AVOIDANCE, EVASION AND UNFAIR OUTCOMES

Profit fragmentation

As announced in last year’s Budget, the Finance Bill will legislate to prevent UK businesses from avoiding UK tax by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level.

R&D tax relief for small and medium-sized enterprises

From 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.

 Stamp taxes on shares: consideration rules

The government will consult on aligning the consideration rules of stamp duty and stamp duty reserve tax (SDRT) and introducing a general market value rule for transfers between connected persons. The aim will be to simplify stamp taxes on shares and to stop contrived arrangements being used to avoid tax. To prevent forestalling, from 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies.

VAT grouping

Certain non-corporate entities will become eligible to join a VAT group from 1 April 2019. In addition, revised VAT grouping guidance will be issued:

• to amend the definition of ‘bought-in services’ to ensure that such services are subject to UK VAT; and
• to provide clarity to businesses on HMRC’s protection of revenue powers and treatment of UK fixed establishments.

Unfulfilled supplies

The VAT treatment of prepayments will change from 1 March 2019 to bring all prepayments for goods and services into the scope of VAT, where customers have been charged VAT but have not collected what they have paid for and have not received a refund.

VAT Regulation 38

Stricter rules will be introduced on how and when adjustments to VAT should be made following a price reduction and will ensure customers are issued with credit notes.

Electronic sales suppression

The government will consult later in the year on the misuse of electronic point of sale functions (i.e. till systems) to hide or reduce the value of individual transactions and the corresponding tax liabilities.

HMRC preferential creditor status 

From 6 April 2020, when a business enters insolvency, HMRC will be treated as a preferential creditor in respect of taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE income tax, employee NICs, and construction industry scheme deductions). The creditor rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer NICs.

Tax abuse and insolvency

Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixing will be jointly and severally liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency.

Conditionality: hidden economy

Following consultation, the government will consider introducing in Finance Bill 2019-20 a tax registration check linked to renewal processes for some public sector licences. Applicants would need to provide proof they are correctly registered for tax in order to be granted licences.

International tax enforcement: disclosable arrangements

Legislation is being enacted to allow the introduction of international disclosure rules about offshore structures that could avoid tax or could be misused to evade tax.

Offshore tax compliance strategy

The government will publish an updated offshore tax compliance strategy.

NATIONAL INSURANCE CONTRIBUTIONS

Class 1 (Employees)	2019/20		2018/19
	Employee	Employer	Employee	Employer
NIC rate	12%	13.8%	12%	13.8%
No NICs for younger employees1 on the first	£166 pw	£962 pw	£162 pw	£892 pw
No NICs for employees generally on the first	£166 pw	£166 pw	£162 pw	£162 pw
NICs rate charged up to	£962 pw	No limit	£892 pw	No limit
2% NICs on earnings over	£962 pw	N/A	£892 pw	N/A
1 Employees generally under 21 years and apprentices under 25 years.

 

Employment allowance	2019/20	2018/19
Per business	£3,000	£3,000
Not available if the sole employee is a director.

 

Earnings limits or thresholds	2019/20		2018/19
	Weekly	Annual	Weekly	Annual
Lower earnings limit	£118	£6,136	£116	£6,032
Primary earnings limit	£166	£8,632	£162	£8,424
Secondary earnings threshold	£166	£8,632	£162	£8,424
Upper earnings limit and Upper secondary earnings threshold (under 21)2	£962	£50,000	£892	£46,350
2 Employees generally under 21 years and apprentices under 25 years.

 

Class 1A (Employers)	2019/20	2018/19
Most taxable employee benefits	13.8%	13.8%
Class 2 (Self-Employed)	2019/20	2018/19
Flat rate	£3.00 pw £156.00 pa	£2.95 pw £153.04 pa
Small profits threshold:	£6,365 pa	£6,205 pa
Class 4 (Self-Employed)	2019/20	2018/19
On profits	£8,632 – £50,000 pa   9%	£8,424 – £46,350 pa   9%
	Over £50,000 pa   2%	Over £46,350 pa   2%
Voluntary	2019/20	2018/19
Class 3 flat rate	£15.00 pw £780.00 pa	£14.65 pw £761.80 pa

 

Please find our new Tax Tables here for the 2018/19 tax year. These tables are up-to-date with everything announced in the Spring Statement, giving you all the key numbers in one place.

Key changes for the forthcoming 2018/19 tax year include:

• Increases to the personal allowance, and basic and higher rate tax thresholds.
• New income tax bands and rates for Scotland.
• A cut in the dividend tax allowance from £5,000 to £2,000.
• Revised company car tax scales, with an increase in the diesel levy.
• The first increase in the lifetime allowance since 2010.
• An increase in the maximum tax relievable investment in Enterprise Investment Schemes.

If you have any questions about the contents of your Tax Tables or how any aspects of your tax and financial planning may be affected by the Budget, please call us to discuss them.

After two full Budgets in 2017, this Spring Statement was a less dramatic affair, with no announcements of tax changes. These will come in the Autumn Budget.

The Chancellor launched a number of consultations and other papers about future proposals. The subjects ranged from ways to squeeze more tax from international digital businesses to a proposal for extending entrepreneurs’ relief to some shareholders whose holdings drop below the qualifying 5% level. He has also been mulling the possibility of lowering the VAT threshold.

April will see the usual changes to the income tax rates and allowances as well as national insurance contributions. This year there will also be a cut in the dividend allowance and some special new tax rates for Scottish taxpayers. The tax increases on company cars may look relatively modest, but their cumulative impact could be significant for some people.

Many employees will see the extra net income from the tax changes eaten up by their higher minimum auto-enrolment pension contributions. The lifetime allowance for pensions has been raised. Less welcome for some will be the changes to employee termination payments and the new rules for enterprise investment schemes.

If you have any questions about how the Spring Statement affects you, please get in touch.

As a limited company director, you can claim money from the company for use of home as office. You, personally, will not need to pay tax on this money and the company can claim tax relief for paying it.

You can claim for things to do with your work e.g. business telephone calls or the extra cost of gas and electricity for your work area. You can’t claim for things you use for both private and business use such as rent or broadband access.

You do not need to provide evidence for claims of up to £4 a week (£18 a month). For claims over this amount you will need to provide evidence of what you spent and how you calculated the proportion charged to the company.

For more details on use of home as office and other tax savings you can make contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.