On Wednesday, Rishi Sunak delivered his first Budget in this Government. For those that watched, the emphasis was very much on ‘Getting it done’ in relation to the Tory manifesto promises.
Aside from the global and economic challenges, we provide a brief overview of what we believe will be of most importance and relevance to financial planners:
- The main rates of income tax, capital gains tax and inheritance tax remain unchanged for 2020/21.
- The personal allowances (aside from a slight increase in the married couples’ allowance) for income tax remain unchanged. This means that those with ‘adjusted net income’ below £100,000 will have a personal allowance of £12,500 from 6 April 2020. (The personal allowance reduces by £1 for every £2 for those with adjusted net income in excess of £100,000. This means that, as now, there will be no personal allowance available once adjusted net income exceeds £125,000 in 2020/21.)
- For those who can benefit from top-slicing relief, where they incur a chargeable event gain on or after 11 March 2020, it will be the ‘slice’ that will be added to their other income to determine whether their adjusted net income is above £100,000 to determine the loss of any personal allowance (for the purposes of top-slicing relief).
- The starting rate band for savings income remains at £5,000.
- The personal savings allowance remains at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
- The dividend allowance remains at £2,000 for all individual taxpayers.
- The threshold for National Insurance will increase from £8,632 to £9,500 for 2020/21. Those earning over £9,500 will be around £85 better-off per annum.
- Child benefit for the eldest child will increase from £20.70 to £21.05 per week, which is an increase of 1.7%.
- The capital gains tax annual exemption rises from £12,000 to £12,300 from 6 April 2020.
- The lifetime limit for entrepreneurs’ capital gains tax relief will reduce from £10 million to £1 million for qualifying disposals made on or after 11 March 2020 – a slash of 90% and back to the original limit when it was first introduced in 2008. The new lifetime limit can also apply to pre-11 March disposals, made in anticipation of this change, which had not completed before Budget day. Also, note that the new lifetime limit will have to be used when taking into account the value of entrepreneurs’ relief claimed in respect of qualifying gains in the past.
- The inheritance tax nil-rate band remains at £325,000 and the residence nil rate band increases to £175,000 for 2020/2021 for those with estates below £2 million.
- The corporation tax rate remains at 19%, despite an earlier announcement that it would reduce to 17%.
- The employment allowance for National Insurance will increase from £3,000 to £4,000 from 6 April 2020.
- The annual subscription limit for Child Trust Funds and Junior ISAs will increase from £4,638 to £9,000 for the 2020/2021 tax year.
- The adult ISA subscription limit remains at £20,000.
- The pension lifetime allowance increases from £1,055,000 to £1,073,100 from 6 April 2020.
- The Threshold Income level for the tapered annual allowance will be increasing by £90,000 in 2020/21, to £200,000, and the Adjusted Income level will be set at £240,000. The minimum the taper can take the annual allowance down to will be £4,000 from 2020/21, a reduction from the current £10,000. The minimum will be reached when Adjusted Income is £312,000 or more. Proposals to offer greater pay in lieu of pension contributions for senior clinicians in the NHS Pension Scheme will not be taken forward. This may impact plans already in place for some senior clinicians for the next tax year.
- As always there was an emphasis on more tax avoidance measures.