Prefaced with a half point interest rate cut, the new Chancellor, Rishi Sunak, has delivered his first UK Budget. Julian Smith, our Head of Tax, explores the key points:
Against the backdrop of the global Coronavirus outbreak and tough market conditions, the Chancellor’s speech unsurprisingly focused on delivering a financial response to prompt economic stability and security. It also began to address the UK’s call for change, following the General Election just a few months ago. Clearly this was a very different Conservative Government than we’ve seen before, and something of a bold Budget in many ways, with a tremendous amount of spending announced, albeit with a great deal of borrowing needed to facilitate it.
Mr Sunak spent time addressing the impact Coronavirus is having on the UK (and global) economy, although he was keen to stress the situation is a tough but temporary one. In response he announced a ‘timely and targeted’ package of £30 billion as part of a fiscal stimulus exercise designed to protect the economy. This will take the form of a range of measures to support the NHS and UK business, including for the latter loans, Statutory Sick Pay refunds for companies with less than 250 employees and the suspension of business rates for the retail, leisure and hospitality sector for 12 months.
The Budget also began to address the need to “level up” between the north and south of the UK, and the top and bottom of society, with some measures announced about infrastructure, although the detail was far from forthcoming, and will likely be addressed in the Autumn Statement.
It was apparent that tax has taken a back seat for now, but there were some announcements in addition to what we already knew about the changes to Capital Gains Tax reporting, lettings relief and other property measures. In digging into the fine print the following key points are worth noting:
- There will be a 2% Stamp Duty surcharge for UK homes bought by those who are non-resident, which will come into force next April. This will be in addition to the 3% surcharge for second homes – taking the possible top rate of Stamp Duty for overseas buyers to 17%.
- The lifetime allowance for pensions (the amount which can be saved in a registered pension scheme free from tax) will increase to £1,073,100.
- Entrepreneurs’ Relief – which permits a lower rate of Capital Gains Tax (10%) to be paid when disposing of all or part of a business where certain criteria are met – has seen its lifetime limit significantly reduced from £10 million to £1 million.
- The pension annual allowance thresholds have been increased by £90,000 a year, removing taper as an issue for most people with incomes under £200,000.
- IR35 rules have been extended to apply to those in the private sector. These rules mean that individuals who work like employees must pay broadly the same Income Tax and National Insurance Contributions as those who are employed directly.
- VAT will be removed from ebooks and digital publications, and feminine hygiene products.
- Class 2 and 3 rates of National Insurance will increase, and the threshold at which class 1 and class 4 contributions are paid will increase to £9,500 from £8,632 from 6 April 2020.
- The Capital Gains Tax allowance will increase from £12,000 to £12,300 from 6 April 2020.