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Marvin Paranjothy: My overview of what yesterday’s Budget will mean for your taxes

I specialise in Tax recruitment here at LMA recruitment, with previous experience of working in Tax before transitioning careers. We are an award-winning company, specialising in a variety of areas and placing candidates on a permanent, contract or interim basis. Following yesterday’s Budget, I have put together a summary of key changes and highlights, outlining what kind of tax implications lie ahead for 2020.

The Budget confirmed the Government’s commitment to increase the thresholds at which employees and the self-employed start paying National Insurance Contributions (NICs) from £8,632 to £9,500 from April 2020. This could result in roughly 1.1 million people being taken out of paying Class 1 and Class 4 NICs entirely.

However, for the first time in nearly 10 years, there was no increase to the Personal Allowance nor the Basic rate tax threshold, which remained at £12,500 and £37,500 respectively.  Such a freeze coupled with forecasted inflation at 2% may leave many people worse off in real terms.

With respect to income tax on savings income, the band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2020-21. The adult ISA annual subscription limit for 2020-21 will also remain unchanged at £20,000. Meanwhile, the annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.

In relation to the changes on pensions tax for higher earners, the pension annual allowance taper threshold will be raised to £240,000 with effect from April 2020, meaning individuals with 'adjusted net income' below this level will not be affected by it. However, individuals with 'adjusted net income' in excess of £300,000 will have their annual allowance reduced from £10,000 to £4,000 from April 2020.

Although Entrepreneurs' Relief will be retained, from 11 March 2020 the lifetime limit on Capital Gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) will be reduced from £10 million to £1 million. This is in response to evidence that it has done little to incentivise entrepreneurial activity.

The Budget also revealed that corporation tax is to remain at 19%. The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax. 

As initially set out in July 2019,
the Government has confirmed a reduction of most company car tax rates by 2% in 2020/21, applicable to cars first registered from 6 April 2020.

From April 2020 the Government will increase the Employment Allowance from £3,000 to £4,000. The increase should take an estimated 65,000 businesses out of paying NICs entirely and means the Government will have doubled the Allowance in four years.

In the new financial year, the Government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to ensure that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts. The 5% VAT on women’s sanitary products (known as the ‘tampon tax’) is to be abolished from January next year.

The rate of Research & Development Expenditure Credit (RDEC) will increase from 12% to 13% from 1 April 2020, supporting businesses investing in R&D and helping to drive innovation in the economy.

With respect to property taxes, the Government will introduce a 2% Stamp Duty Land Tax (SDLT) surcharge, down from 3% as previously proposed, on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021. The aim of this is likely to help control house price inflation and combat the UK housing crisis, especially for first time buyers.

Other property tax changes cited in the Budget included the introduction of a relief for qualifying housing co-operatives from the Annual Tax on Enveloped Dwellings and the 15% flat rate of SDLT on purchases of dwellings over £500,000.

Should you like to review any of the above or assess your options within the Tax sphere, then please do get in touch. I currently have a number of exciting opportunities available, which I am more than happy to discuss in further detail.

Alternatively, if you would like to find out more about the tax market or other areas of recruitment which LMA focus on, one of our recruitment specialists will be more than happy to assist.

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Marvin Paranjothy

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