On 11 March 2020, the new Chancellor, Rishi Sunak, delivered his first Budget. It was also the first Budget since Boris Johnson became Prime Minister in July, the General Election in December and the departure from the European Union in January. A lot has changed!
Where tax is concerned, some of the main highlights are as follows:
- The capital gains tax (CGT) free annual exemption for 2020/21 will be £12,300 (or up to £6,150 trusts).
- The starting rate at which employees and the self-employed will pay national insurance for 2020/21 will be £9,500. This however is still lower than the income tax threshold of £12,500 (which remains fixed at that level for 2020/21 – indeed, all income tax rates and bands remain fixed for 2020/21).
- For individuals with taxable income in excess of £110,000, there will be a potential increase as from 6 April 2020 to the amount which they can contribute into their pension each year without incurring an income tax penalty. Although for individuals with taxable income (plus pension contributions) in excess of £300,000, there is a potential decrease.
- The lifetime limit for entrepreneurs relief – a relief which charges certain gains at 10% CGT, as opposed to (most likely) 20% – has been immediately cut to £1million. Prior to the Budget it was £10million. For certain transactions where the contract was exchanged prior to 11 March 2020 (ie when the limit was still £10million), but completion did not (or will not) occur until afterwards, the lower £1million limit may apply.
- A additional 2% stamp duty land tax (SDLT) charge will apply as from 1 April 2021, for non-UK residents who purchase residential property in England or Northern Ireland.
- The ISA subscription limit for 2019/20 will again be frozen at £20,000. However, the Junior ISA limit will increase to £9,000.
- As expected, the rate of corporation tax will remain at 19%. Under Theresa May and Phillip Hammond, the rate was going to decrease to 17%.
Interestingly, inheritance tax (IHT) was not a feature of this Budget. This is despite speculation that reform of the tax is in the offing. However, with another Budget expected later this year (most likely in November) – the Budget on 11 March was ultimately a delayed Budget from 2019 – it may be that IHT features more heavily then.