Budget 2020: Key Points

Today, Chancellor Rishi Sunak delivered his first (and long-awaited) Budget in the House of Commons. In this blog, we’ll outline all the government’s key tax and spending plans for the year ahead. 

Coronavirus

As was to be expected, much of the Budget focussed on the recent coronavirus outbreak. The Chancellor announced how the government will be responding: 

• £5bn emergency response fund to support the NHS and other public services 
• Statutory sick pay will be paid to all those who choose to self-isolate, even if they don’t have symptoms 
• Statutory sick pay will be paid from day one of illness instead of day four 
• You will be able to self-certify illness via the 111 service who can issue sick notes 
• Contributory Employment Support Allowance benefit claimants will be able to claim sick pay on day one, not after a week 
• £500m hardship fund to help vulnerable people 
• Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks 
• A new HMRC team of 2000 staff is set up to handle Time to Pay arrangements as a result of Coronavirus. HMRC to waive any late payment penalties and interest as a result of Coronavirus. 
• Coronavirus Business Interruption Loan Scheme – The government is launching a temporary scheme delivered by the British Business Bank to provide lenders with a guarantee of up to 80% on existing business loans up to 1.2M in value. To give lenders further confidence to provide loans to SME’s. 

Business rates

• Business rates to be reviewed in general later this year 
• Business rates retail discount – from 1st April 2020 discount was set to increase to 50% from 33% however as a response to the COVID-19 outbreak, for firms with a rateable value below £51,000 they are increasing this to 100% and expanding this to the hospitality and leisure sector for 2021. 
• £1,000 business rates discount for pubs increased to £5,000 for pubs with a rateable value of £100,000 or less 
• Firms eligible for small business rates relief will get £3,000 cash grant 

Tax

• National Insurance Contributions tax threshold to rise from £8,632 to £9,500 – saving people just over £100 a year 
• The ‘tampon tax’ is to be scrapped 
• Entrepreneurs’ Relief Lifetime Limit to decrease from £10m to £1m 
• Research and Development Expenditure Credit (Large companies) to increase from 12% to 13% 
• R&D Relief for SME’s – The previously announced PAYE cap (R&D Tax Credits can only be claimed up to 3 times the electing companies PAYE bill) will be delayed until 1st April 2021
• Employment Allowance increased by 1/3rd from £3,000 to £4,000 
• VAT on digital publications such as newspapers, books and academic journals to be scrapped from December 
• Corporation tax frozen at 19% until further notice – UK still the lowest in the G20 
• Plastic packaging tax to come into effect from April 2022 at £250 per tonne of plastic packaging used per business 
• Intangible fixed asset (IFA) regime to be reformed to reinforce UK attractiveness for businesses. Current legislation allows for no tax relief on the acquisition of goodwill
• Changes to the current VAT system expected as a result of Brexit (VAT is an EU tax) 
• Use of home as office allowance to increase to £6 per week (for employees working from home) 
• Stamp duty surcharge for foreign buyers of UK properties to be levied at 2% from April 2021 
• IR35 reform plans in the private sector have been postponed until April 2021

Pensions 

• Tapered annual allowance for pensions –The two tapered annual allowance thresholds will both be raised by £90,000. This means that in the 2020-21 tax year, the threshold income before tapering applies will be £200,000. So, individuals with income below this level will not be affected by the tapered annual allowance and tapering will commence once adjusted income reaches £240,000
• The minimum level of tapering has also decreased from £10,000 to £4,000. This reduction will only affect individuals with a total income of over £300,000 
• The lifetime allowance, i.e. the maximum amount an individual can accrue in a pension scheme in their lifetime will increase to £1,073,100. In line with CPI. 
• Tax paid on the pensions of high earners to be recalculated 

Other

• Planned rise in beer duty frozen 
• Fuel duty frozen for a year 
• An extra £900m to be allocated to the research of nuclear fusion, space and electric vehicles  
• £640m “nature for climate fund” to protect natural habitats, including 30,000 hectares of new trees 
• Total investment in flood defences to be doubled to £5.2bn over next five years 
• Red diesel will be scrapped “for most sectors” in two years’ time – red diesel subsidies will remain for farmers and rail operators