Big-spending Sunak vows to support individuals in these unsettling times
Big-spending Sunak vows to support individuals in these unsettling times
The Chancellor Rishi Sunak delivered his first budget on 11th March, amidst one of the most difficult and uncertain times for the economy.
This was a budget focused on big spending announcements and heavily influenced by the need to shield individuals, businesses and the economy from the potential effects of the COVID-19 pandemic, supported by the measures brought in by the Bank of England including the reduction in the base rate to 0.25%. There were therefore few big announcements for individual taxation and no mention of the proposed reforms to either Inheritance Tax or trusts taxation – it is anticipated that these topics may well be delayed until the Autumn budget.
After the speculation surrounding the future of Entrepreneurs Relief it was confirmed that this is not to be abolished completely but instead a reduction in the lifetime allowance will be introduced. A summary of the key measures for individuals is set out below.
Income Tax
- The personal allowance will remain at £12,500.
- The basic rate for income tax will remain at £37,500 and the higher rate threshold at £50,000 for the tax year 2020/21. It was announced that the figures would rise in line with the Consumer Prices Index from April 2021
- The dividend allowance will remain at £2,000
- The savings income allowance will remain at £5,000
- The Finance Bill 2020 is to include clarification on the way in which top slicing relief is calculated on life insurance policy claims, in particular in order to permit an individual’s personal allowance being reinstated where the top slice calculation has resulted in the allowance being potentially reduced to nil. These changes will apply to all chargeable gains made on or after 11th March 2020.
Capital Gains Tax
The Capital Gains Tax allowance will increase from £12,000 to £12,300 for individuals and from £6,000 to £6,150 for Trusts as from 6th April 2020. This increase is in line with the Consumer Prices Index.
Entrepreneurs Relief
The lifetime limit for disposals eligible for the 10% tax rate is reduced from £10 million to £1 million with effect for qualifying disposals made on or after 11th March 2020 and also for certain disposals made before 11th March 2020. Any relief claimed on previous gains must be taken into account when establishing the lifetime limit available.
Corporation Tax
The rate of corporation tax will remain at at 19% and not be reduced to 17% as previously planned.
Pensions
- As from 6th April 2020 the annual income threshold for the tapering of the annual allowance will increase from £110,000 to £200,000 which will reduce the number of taxpayers at risk of breaching this limit and being subject to charges.
- The minimal annual allowance will be reduced from £10,000 to £4,000
- The lifetime allowance will increase to £1,073,100 in line with the Consumer Prices Index.
ISA Subscription Limits
- The annual ISA subscription limit will remain at £20,000 which has not changed since 6 April 2017
- The annual subscription limit for Junior ISAs will increase from £4,368 to £9,000 from 6th April 2020.
HMRC Time to pay Arrangements
A new time to pay scheme is to be introduced to help businesses and self-employed individuals manage their cash flow as a result of the financial difficulties which may be caused by COVID-19. A dedicated helpline and bespoke arrangements will be brought in to enable taxpayers to potentially defer tax payments for a time limited period, as well as agreeing that interest and penalties which would normally be charged on late payments will be waived.
Speak to one of our Private Client Team
IBB has one of the largest private client teams in the region. They can give you expert advice on anything from wills , through personal tax, to private wealth advice. Contact one of the team at 03456 381381 or email us at estatemanagement@ibblaw.co.uk
