The bulk of the new Chancellor Rishi Sunak’s speech was tailored to expectations of the impending Coronavirus pandemic, with the government borrowing heavily in an attempt to minimise any economic downturn. For a general overview of all budget matters, the BBC’s summary here is as good as any.
As always, we’ll focus on the tax related announcements most likely to be of relevance to our typical client.
Imminent changes, either from the new budget, or previously announced but just coming into play are:
– IR35 – changes in the private sector pressing ahead as planned. If you predominantly work for just one client at a time, and they’re a UK based medium-large company, we would hope they’ve already spoken to you about this. See here for further details.
– Entrepreneurs relief – relevant to those of you who have substantial cash balances in your company, considering closing it. There was much speculation about possible abolition of this relief, but instead the lifetime limit has been reduced from £10m to £1m.
– Pension thresholds/tapering – relevant to higher earners keen to make significant pension contributions. Rules as they stand give a £40k annual pension contribution cap, but this is tapered down for those with total income (including pension contributions) exceeding £150k, potentially to just £10k. From 6 April 2020, the annual cap remains at £40k, and won’t be tapered downwards unless your total earnings are above £240k.
– VAT on ebooks – has been reduced to 0%. So expect trivial reduction in costs of these, but for those of you selling them this will be more relevant.
– Employment allowance – increased from £3,000 to £4,000. Not relevant for those of you with only one person on the payroll, but a minor extra tax break to those employing others.
– Use of home as office – this “every little helps” amount can increase from £4/week to £6/week.
– Statutory sick pay (SSP) – if you’re unable to work due to the Coronavirus, SSP can be reclaimed from the government for up to 2 weeks. This could equate to a total of £188, so not one to get too excited about.
– Corporation tax – no change, will remain at 19%. We mention this as previously the CT rate was to reduce to 17% from April 2020, but this reduction has been cancelled.
– Business rates – only relevant for those of you working from business premises (not your home or client sites), and sufficiently complicated and varied that it’s impossible to put even a brief summary here. However, seems there will be a few tax breaks available to those who pay business rates.
– Capital gains on sale of investment properties – an incoming change for those of you owning more than one property. When selling an investment property (ie one other than your home), a capital gains tax form needs to be submitted, and liability paid, within 30 days. We are hoping(!) that conveyancers will as a minimum highlight this, ideally also completing these forms on your behalf (eg as they tend to do with stamp duty). However, if not, do let us know and we’ll assist where we can.
– All electric company cars – the benefit in kind (BiK) rate for all electric company cars is about to plummet. This means there can be (at least short term) tax gains if you’re in the market for a new car, and are happy to go all electric. However, do consider the medium to long term. If your company buys or leases a car, that’s a commitment. Hence only worth doing if your company can not only afford it, but you’re confident your company will continue trading profitably for the foreseeable future. Also doesn’t tend to be viable for those of you looking at second hand cars, as the BiK is based on the list price when new, even if the car is several years old.