Individuals urged to be mindful of Budget 2020 measures

The first Budget of Chancellor Rishi Sunak’s career includes a host of taxation measures that could have implications for your personal tax situation.

Entrepreneurs’ Relief limit slashed from £10m to £1m

Despite suggestions in certain quarters, that Entrepreneurs’ Relief could be abolished altogether in Budget 2020, the Chancellor has announced what many have already called a “sensible compromise”.

From 11th March 2020, the lifetime limit on 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. The relief currently costs the Government an estimated £2.6bn per annum.

National Insurance Contributions threshold to rise to £9,500

From April 2020, the threshold for National Insurance Contributions (NICs) will increase to £9,500. This decision means that those earning more than £9,500 a year will be £78 better off if you are self employed or £104 if you are employed. Around 1.1 million people will be taken out of paying Class 1 and Class 4 NIC entirely.

Mr Sunak said: “Taking into account the changes to the National Living Wage, Income Tax and now National Insurance, someone working full time on the minimum wage will be more than £5,200 better off than in 2010.”

Threshold for pensions tax relief raised to £200,000

The Chancellor also confirmed that the tapered annual allowance thresholds for pensions tax relief will each be raised by £90,000 from April. The annual allowance is the maximum an individual can save in their pension each year that attracts tax relief.

From 2020-21 the ‘threshold income’ will be £200,000, meaning individuals with personal income below this level will no longer be affected by the tapered annual allowance and the annual allowance will only start to taper down for individuals with an ‘adjusted income’ above £240,000.

New Capital Gains Tax rules applicable from April 2020

Capital Gains Tax (CGT) on the sale of residential properties, is set to change from April 2020. UK residential property sales from April 2020 will require sellers to both submit an interim return and pay their outstanding CGT within 30 days of the completion date or risk facing additional penalties for late payment.

Changes are also anticipated to private residence relief (PRR). The relief exempts gains on properties which have always been your home, but is also applicable to property landlords that have rented out their home.

Currently, landlords who previously lived in their rental property qualify for a final period of exemption of 18 months. This is essentially a window of opportunity for landlords to sell their properties before being required to pay capital gains tax.

From next month, the Government will halve this timeframe to nine months.

At the same time, 'lettings relief', which is also currently available to reduce gains where a property has been your home, and also let during the period of ownership, will be restricted to the period when you occupy the property at the same time as the tenant.

However, rules will also be introduced to make the rules relating to properties which have changed ownership between spouses, more beneficial for the taxpayer.

For a full round-up of all the announcements and changes affecting your business from Budget 2020 speech, read our comprehensive Budget 2020 round-up here.

If you have any questions about how any of these announcements may affect you and your business, get in touch with us today on 0114 294 5358 or use our simple online enquiry form.

Date published 11 Mar 2020 | Last updated 25 Sep 2020