There were lots of items in the budget which should help businesses and individuals over the coming tax year, although there is a worry in the long term as to where the funds are coming from.

Coupled with this are the initial proposals to help as part of the Covid-19 response.

Here are some of our highlights:

Businesses
A reminder that HMRC’s “Time to pay” scheme is still in existence. This allows SMEs that cannot afford to pay their tax bills to ask HMRC for an agreement which would suspend debt collection. There is usually a 3.5% interest charge but during the current coronavirus outbreak this will be waived.

Business rates – if you are currently paying rates then an additional relief has been implemented for businesses in the retail, leisure and hospitality sectors for 2020-21, which will affect our restaurant and coffee shop clients. The discount was to be 50% but has now been increased to 100% for the tax year.

£3,000 grant – Up to 70,000 of the smallest businesses may be eligible for grants to help meet business costs. Watch this space as it is not yet clear how this will be accessed and what the entitlement criteria actually will be, but the documentation implies it will be for those who currently receive the small business rate relief (SBRR).

SSP – currently employers can not reclaim statutory sick pay paid to ill employees. As a concesion during the coronavirus period, SMEs will be able to reclaim the cost of 14 days of sick pay (just under £200 per employee) for employees who are self-isolating or caring for a member of their household who is displaying symptoms. There is not yet a mechanism set up by the government to do this, so it could be months before the SSP reclaim can be made

Employees NIC – From 2020/21 NIC thresholds rise to £9,500 pa, meaning a typical employee will pay ~ £104 less than in the 2019/20 tax year. Note that employers NI thresholds and rates are at a lower level of £8,788 (vs £8,632 in the prior year).

Class 2 NIC – this will be £3.05pw for 2020/21 (was £3.00 for 2019/20)

Employment allowance increases to £4,000 (was £3,000) for small employers whose NIC liability in the previous tax year was under £100,000.

Corporation Tax – this will remain at 19% (the planned reduction to 17% will not go ahead)

Individuals
Change to the Entrepreneurs’ Relief lifetime limit for Capital Gains Tax – The Entrepreneurs’ Relief lifetime limit is reduced from £10 million to £1 million. This will apply to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020 – see guidance here

Pensions tax income thresholds – currently individuals with a threshold income of between £110k and £150k are affected by the tapered annual allowance with maximum contributions of £10k each tax year. From April the threshold income will be £200k and the adjusted income will be £240k so less individuals will be affected by the taper. However for those affected the minimum tapered annual allowance is decreased to £4k (from £10k).

Pension life time allowance – this increases in line with CPI to £1,073,100 from 6/4/20

Home working – Currently employees working from home and incurring addiontal household costs can claim £4pw. This will increase to £6pw from April 2020.

CGT/ Disposal of UK properties – important changes to reporting and paying Capital Gains Tax for individuals who dispose of UK property that is not their main place of residence, from April 2020.

Tax Bands – personal allowance is frozen at £12,500 and higher rate threshold is also frozen at £50,000

Capital Gains Tax – annual exempt amount for 2020/21 will be £12,300 (from £12,000)

Other
Off Payroll working from April 2020 – it was thought that the government may delay or amend the IR35 private sector proposals – however this has not changed. Look at our previous newsletters for guidance on what this may mean for you as a PSC

Electric cars – These are a tax efficient way to remunerate employees from 2020/2021 to 2022/2023. The benefit in kind rates are respectively 0%, 1% and 2% for these three tax years.
For eg, an employee would only pay tax on a £1,000 benefit in respect of the provision of a £50,000 company Tesla in 2022/23. The budget announced that this rate will be frozen until 2024/2025 which is welcome news.

Cars – 100% first year allowances due to expire in April 2021. However 0g/km emission cars can still get FYAs until 2025. From 2021 main pool will only be for cars emitting less than 50g/km, with the special rate pool (and much worse capital allowances) for cars over 51g/km