Lots of provisions in the Budget to try to minimise the economic effects of Coronavirus. Otherwise the main changes affecting my clients were as follows:-
Tax bands – no change in the tax free personal allowance of £12,500 and basic rate tax band of £37,500
National Insurance threshold – the level at which employees pay NIC will increase from £8,632 to £9,500 resulting in a tax cut of around £104 for employees and £78 for the self employed. However the employers NIC has only increased to £8,788. Thus the tax efficient salary for one man companies will be £732 pm (up from £719pm).
Tapered annual allowance for pensions
The thresholds of £110,000 and £150,000 will increase by £90,000 meaning that the annual allowance will only begin to taper down for individuals who have “adjusted income” above £240,000 (previously £150,000). However those with income of over £300,000 will only be able to contribute £4,000 to their pensions before tax relief if clawed back (previously £10,000).
Home workers – the HMRC rate to cover household expenses will rise from £4 to £6 per week
Capital gains annual exemption limit – this has increased from £12,000 to £12,300
Inheritance tax – the nil rate band remains at £325,000 but the residence nil-rate band has increased to £175,000 (as previously announced).
Corporation tax remains at 19%
Entrepreneurs relief – the lifetime limit on gains which qualify for the 10% tax rate under entrepreneurs’ relief is reduced from £10m to £1m. Gains above this limit will be charged at the standard rate of 20%. 80% of entrepreneurs selling their businesses are unlikely to be affected by this.
Off payroll reforms from 6 April 2020 – there was no movement on this. There will be a duty on the client to determine whether a contractor is inside or outside of IR35 and HMRC have issued guidance on this. It remains to be seen how it will operate in reality.
Employment allowance – this will increase from £3,000 to £4,000
VAT threshold – remains at £85,000