Chancellor Rishi Sunak presented the UK's Budget 2020 on 11 March 2020.
Tax highlights and key measures are as follows.
Income Tax
Rates & Allowances
From 6 April 2020
- No changes to income tax rates or to the basic personal allowance.
- The income limit for the age-related married couples allowance increases from £29,600 to £30,200.
- The maximum amount married couple’s allowance for those born before 6 April 1935 increases to £9,075.
- The minimum amount of a married couple’s allowance increases to £3,510.
- The blind person’s allowance increases to £2,500.
Individual Savings Account (ISA) investment limits
From 6 April 2020
- The Junior ISA subscription limit increases to £9,000.
- The Child Trust Fund (CTF) subscription limit increases to £9,000.
- No changes to Adult ISA savings limits.
See ISA Allowances
National Insurance Contributions (NICs)
From 6 April 2020
- As previously announced: the Employee Primary Threshold increases to £9,500.
- For self-employed taxpayers, the threshold at which Class 2 NICs is payable rises to £6,475 and the Class 4 threshold rises to £9,500.
New Tax Reliefs
Tax exemptions for bursary payments to care leavers
- New income tax and NICs exemptions for the one-off £1,000 bursary paid to those aged between 16 and 24 who enter an apprenticeship on leaving care.
Tax exemptions for payments made under the Windrush Compensation Scheme
- Payments made on or after 3 April 2019 are free from Income Tax, Inheritance Tax (IHT) and Capital Gains Tax (CGT).
Tax exemptions for payments made under the Troubles Permanent Disablement Payment Scheme
- Payments made on or after May 2020 are free from Income Tax, IHT and CGT.
Top Slicing Relief (TSR)
From 11 March 2020
- The personal allowance is to be reinstated within the calculation for TSR.
- The treatment of allowances and reliefs within the TSR calculation is to be clarified by confirming that they must be set as far as possible against other income in preference to the gain.
See Top slicing relief: how you slice it
Pensions
From 6 April 2020 the Lifetime Allowance increases from £1,055,000 to £1,073,100.
- The higher rate for taper increases to £200,000.
- The threshold income is increased from £110,000 to £200,000.
- The adjusted income is increased from £150,000 to £240,000.
- The minimum tapered annual allowance is decreased from £10,000 to £4,000.
See Pensions
Making Tax Digital for Income Tax
- No announcement made.
See Making Tax Digital for Income Tax timeline
Capital Gains Tax
Rates & Allowances
From 6 April 2020
- The annual exemption rises to £12,300 for individuals and personal representatives and £6,150 for trustees
Entrepreneurs' Relief
- Lifetime allowance reduces from £10 million to £1 million.
- There are special provisions for disposals entered into before 11 March 2020 that have not been completed and in relation to certain Entrepreneurs’ Relief elections following an exchange of shares for those in another company.
Inheritance Tax
Rates & Allowances
- The residence nil rate band increases to £175,000, this measure was announced in 2017 and is part of the transitional introduction of the relief.
IHT: tax treatment for Kindertransport Fund Payments
- An IHT relief for compensation payments made from the Kindertransport Fund.
- This relief will apply to all payments from the Kindertransport Fund whenever made and will take effect in relation to deaths on or after 1 January 2019 when the scheme first opened.
Employers
Statutory Sick Pay (SSP) and the Covid-19 virus
- SSP may be paid from day one of the employee's absence from work.
- For a business with less than 250 employees, the cost of statutory sick pay for up to 14 days will be refunded by the government in full.
Employers NIC allowance
From 6 April 2020
- This increases from £3,000 to £4,000.
NICs holiday for employers of veterans
From April 2022
- A NIC holiday for employers of veterans in their first year of civilian employment exempts employers from any NIC liability on the veteran’s salary up to the Upper Earnings Limit.
- Transitional arrangements will effectively enable employers of veterans to claim this holiday from April 2021.
- The government will consult on the design of this relief.
Flat rate tax deduction for home working
From 6 April 2020
- The employees' home working allowance, to cover additional household expenses, increases from £4 to £6 per week where they work at home under homeworking arrangements.
See subscriber's guide: Employees: what expenses can I claim for home working?
Tax treatment of welfare counselling provided by employers
From 6 April 2020
- Tax-free medical treatment extends to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services.
See subscriber's guide: Medical benefits and health checks
Car benefits
From 6 April 2020
- The multiplier for the car fuel benefit multiplier increases to £24,500.
- All new cars provided to employees and available for private use that are first registered from 6 April 2020 will be taxed according to the CO2 emissions figure, measured under the Worldwide Harmonised Light Vehicle Test Procedure system.
See Company cars
CO2 emissions tables
- The table is updated for 2021 onward.
Vans
From 6 April 2020
- The flat-rate van benefit charge increases to £3,490.
- The flat-rate van fuel benefit charge increases to £666.
See Van benefits.
Zero-rating zero-emission vans from the van benefit charge
From 6 April 2021
- There will be a zero van benefit charge for vans that produce zero carbon emissions.
See Van Benefit Charge (VBC) Zero emission vans
Loan Charge
- Recommendations from the independent review of the Loan Charge will apply retrospectively from 5 April 2019.
- The changes will also benefit those that have made, or are due to make, certain voluntary payments to HMRC under a final settlement agreement.
See Disguised Remuneration Zone
Partnerships
Clarifying the treatment of Limited Liability Partnership (LLP) returns
- Finance Bill 2020 will legislate prospectively and retrospectively to put beyond doubt that LLPs should be treated as general partnerships under Income Tax rules.
- This will ensure HMRC can continue to amend LLPs members’ tax returns where the LLP operates without a view to profit.
Companies
Tax rates
- As previously announced, the decrease in the main rate will be reversed. It will remain at 19% for 2020 and 2021.
Research & Development
From 1 April 2020
- An increase in the rate of the Research and Development Expenditure Credit from 12% to 13%.
Preventing abuse of the R&D tax relief for small and medium enterprises (SME)
- Following a consultation last year, the government will delay the implementation of the PAYE cap on the payable tax credit in the SME R&D scheme until 1 April 2021.
- The government will also consult on changes to the cap’s design.
Extension of R&D relief
- The government will be consulting on extending the scope of R&D relief to include expenditure on data and cloud computing.
See R&D zone
Intangible fixed assets: relief for pre-Finance Act 2002 assets
- Finance Bill 2020 will adjust the tax treatment of intellectual property under the intangible fixed asset regime.
- All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 to come within the intangible fixed asset regime, subject to certain transitional provisions in respect of related party acquisition costs
See Goodwill and the intangibles regime
Large company digital services tax
From 1 April 2020, as previously announced:
- A 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users.
- This applies only to large multi-national enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users.
See subscriber's guide Digital Services tax
Corporate Loss restriction
For accounting periods ending on or after 1 April 2020
- Companies making chargeable gains will only be able to offset up to 50% of those gains using carried-forward (allowable) capital losses.
See Losses: trading and other losses
Deferral of Corporation Tax Payments
- A change is being introduced in Finance Bill 2020 intended to remove uncertainty over the compatibility with EU law of the UK rules, for taxing gains realised on the transfer of assets within a group of companies.
Non-Resident Property Owning Companies
- Finance Bill 2020 will include measures designed to ensure a smooth transition of the taxation of UK property profits of non-UK resident companies from Income Tax to Corporation Tax.
- Further technical changes are made with regard to notification of chargeability.
See Non-resident landlord scheme
Capital Allowances
Structures & Buildings Allowance
From 11 March 2020, with retrospective effect.
- An increase in the allowance from 2% to 3%.
-
The new rate will be effective from:
- 1 April 2020 for businesses within the charge to corporation tax and
- 6 April 2020 for businesses within the charge to income tax.
- Additionally, the new rate does not just apply to new spend, it applies to businesses that incurred qualifying expenditure on new non-residential structures and buildings on or after 29 October 2018.
- See Budget 2020: Structures & Buildings
See Structures & Buildings Allowance
Enterprise Zones
- 100% first-year capital allowances will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.
See Enterprise Zones: plant and machinery allowances
Vehicles
Capital allowance carbon dioxide emissions thresholds for business cars, goods vehicles and equipment for gas refuelling stations
From April 2021
- The period when the 100% first-year capital allowances are available for this expenditure is extended from April 2021 to April 2025.
- The measure also reduces the carbon dioxide (CO2) emission thresholds which are used to determine the rate of capital allowances available for business cars. This will also reduce the threshold for the lease rental restriction.
Land & Property
Annual Tax on Enveloped Dwellings (ATED)
From April 2020
- The ATED charges will rise by 1.7% from 1 April 2020 in line with the September 2019 CPI.
See ATED
Non-UK resident Stamp Duty Land Tax (SDLT) surcharge
From 1 April 2021
- A new 2% SDLT surcharge on residential property purchases.
- Where contracts are exchanged before 11 March 2020 but complete or substantially performed after 1 April 2021, transitional rules may apply subject to conditions.
- The government will shortly publish the results of its 2019 consultation on introducing an SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland.
Stamp Duty Land Tax and Stamp Duty Reserve tax
Transfers of unlisted securities
- Transfers of unlisted securities to connected companies will be caught by the extended market value rule where there is an issue of shares by way of consideration for the transfer.
- Proposed legislation will amend the rules on share for share exchanges so that most share for share exchanges, which are part of a partition demerger arrangement will not have a disqualifying arrangement for the purposes of those sections.
VAT
Construction Industry Scheme (CIS) domestic reverse charge
- It is confirmed that VAT domestic reverse charge for building and construction services will now come into force on 1 October 2020.
See CIS VAT Domestic Reverse Charge
VAT: applying a zero rate to e-publications
From 1 December 2020
- A zero rate of VAT applies to e-publications, to ensure that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.
Call-off stock
This legislation will have a retrospective element, applying to goods that are removed from a Member State or the UK on or after 1 January 2020.
- EU Council Directive 2018/1910 relates to the VAT treatment of supplies of call-off stock across EU borders.
- It makes a change to introduce simplified rules for the VAT treatment of movements of call-off stock between the UK and EU Member States, allowing businesses to delay accounting for VAT until the goods are called-off.
VAT: amendment to the Agricultural Flat Rate Scheme (AFRS)
From 1 January 2021
The introduction of new entry and exit rules for the VAT AFRS. The following changes will be implemented:
- Businesses can join the AFRS when their annual turnover for farming-related activities is below £150,000.
- Businesses must notify HMRC once their annual turnover for farming-related activities exceeds £230,000, to be deregistered from the scheme and register for VAT instead
- Businesses with a turnover that exceeds £85,000 for non-farming related activities will still be required to register for VAT and will be ineligible for the scheme.
Introduction of a zero rate of VAT for women’s sanitary products
From 1 January 2021
- Following enabling legislation in Finance Bill 2016, the government finally gives the green light to introduce a zero rate of VAT for women’s sanitary products.
S4C Section 33 VAT Act review
- The government will legislate later in the year to add S4C to the special VAT refund scheme for public bodies, which will allow S4C to receive a refund of VAT incurred on its public service activities.
- HM Treasury and the Department for Digital, Culture, Media & Sport will conduct an internal review in spring 2020 to establish whether other broadcasters should be given similar VAT treatment.
Postponed VAT accounting
From 1 January 2021
- Registered businesses will be able to account for VAT on goods they import from all countries, including the EU, on their periodic VAT return.
Administration
HMRC Automation
- As announced by a written ministerial statement on 31 October 2019 and confirmed at Budget 2020, the government will legislate to confirm that HMRC may use automated processes to issue taxpayers with notices to file tax returns and penalty notices.
- This measure will apply prospectively and retrospectively.
Protecting your taxes in insolvency
From 1 December 2020
- As announced at Budget 2018, the rules change so that when a business enters insolvency HMRC will become a protected creditor over taxes collected and held by businesses on behalf of other taxpayers e.g. VAT, Pay As You Earn, Income Tax, employee NICs, student loan deductions and Construction Industry Scheme deductions.
- The commencement date of this measure is delayed from 6 April to 1 December 2020 and it is extended to Northern Ireland.
- The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs.
Raising standards in the market for tax advice
- The government will publish a call for evidence on raising standards in the market for tax advice in the Spring.
- This will seek evidence about providers of tax advice, current standards upheld by tax advisers, and the effectiveness of the government’s efforts to support those standards, in order to give taxpayers more assurance that the advice they are receiving is reliable.
Devolved Taxes
Tax treatment of certain Scottish social security benefits
- Measures to clarify the tax treatment of three new social security benefits introduced by the Scottish Government.
Other measures
Plastic Packaging tax
From April 2022
- A £200 per tonne tax rate for packaging with less than 30% recycled plastic.
Red diesel
End of tax relief from 2022
- With exceptions for agriculture, fishing and rail industries.
Nature for forest fund
- A new fund to plant trees in the UK
Landfill tax
- New rates of Landfill Tax. The rates being amended and the new rates will be:
| Material sent to landfill | Rates from 1 April 2019 | Rates from 1 April 2020 |
|---|---|---|
| Standard rated | £91.35/tonne | £94.15/tonne |
| Lower rated | £2.90/tonne | £94.15/tonne |
Student Loans
- The government has published a policy paper, 'Review of the student loan sale programme' which analyses the results of its small part sales of student loans.