The Budget 2020 Overview

This was a budget delivered by a new Chancellor against the backdrop of a worsening COVID-19 crisis and recent economic shocks, and as a result the speech was probably very different to the one that was being prepared only a few weeks ago.

Quite rightly, the focus of the speech was on how to support the economy in the face of the difficult circumstances the country is now facing, and involves massive increases in government spending in an attempt to keep the economy on an even keel.

Before the budget took place the Bank of England announced that based rates are to be cut from 0.75% to 0.25% to reduce borrowing costs.

Headline measures announced to provide help to business and individuals include:

1. A one year cancellation of business rates for businesses in the retail, leisure and hospitality sectors occupying properties with a rateable vale of less than £51,000

2. Statutory sick pay will be paid from the first day of sickness, including for those who are advised to self-isolate but who are not displaying any symptoms

3. The government will fully reimburse statutory sick pay costs for all businesses with less than 250 employees for up to 14 days of absence, whether caused by actual illness or the need to self isolate for precautionary reasons

4. The self-employed who are not currently able to claim sick pay will be able to claim Employment Support Allowance (ESA)

5. The ESA benefit will be available from day one, and not after a week

Turning to tax matters, the major changes announced today are as follows:

1. After much speculation about the possible abolition of Entrepreneur’s Relief, the Chancellor has not gone that far, but has instead reduced the maximum amount of capital gains that any individual can claim during their lifetime from £10 million to £1 million.  This change will affect any qualifying disposals made on or after 11 March 2020.

2. There will be significant changes to the annual allowance for pension contributions for higher earners.  At the moment anyone with threshold income of more than £110,000 and adjusted income of more than £150,000 will have the maximum amount they can pay into a pension fund reduced from the normal maximum of £40,000. From April 2020, these limits are being raised to a threshold income of £200,000 and an adjusted income of £240,000.  Anyone earning more than £240,000 will have their maximum annual allowance reduced, and minimum reduced allowance will fall from £10,000 to only £4,000.

3. The income level at which employees NI and the self-employed Class 4 NI starts to be charged is increasing on 6 April from £6,832 to £9,500, which is in line with a manifesto pledge made by the Conservatives before the recent election.

4. The rate of research and development expenditure credit is being increased from 12% to 13% on 1 April 2020.

5. The annual rate of Structures and Buildings Allowance will be increased from 2% to 3% with effect from 1 April 2020 for companies and 6 April 2020 for unincorporated businesses.
This is only some of the more significant measures announced yesterday, and we will be publishing further details about the budget over the course of the next few days.
 

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