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Spring 2020 Budget Summary

Just one month into his new role as Chancellor of the Exchequer, Rishi Sunak has delivered his first Budget Statement promising 'historic' investment in roads, railways, broadband and scientific research, as the government tries to deliver on its promise to level up the UK. Ahead of the Statement, the Chancellor said that it would be "a Budget for people right across the country - no region will be left behind."

The Chancellor opened the Statement by addressing current coronavirus Covid-19 concerns. He said that there is likely to be a temporary disruption to the economy, but the government will do whatever it takes to support it. On the supply side, the government anticipates that up to a fifth of the working age population could need to be off work at any one time. Business supply chains are currently being disrupted around the globe. The combination of these factors will mean that for a period, UK productive capacity will shrink. There will also be an impact on the demand side of the economy, through a reduction in consumer spending. The Chancellor went on to outline a comprehensive set of measures to support business and households through the coronavirus crisis with business rate relief, time to pay tax deferrals and underwriting the cost of statutory sick pay for smaller businesses. HMRC have also set up a dedicated phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to covid-19.

Although the personal tax allowance will remain at its current level of £12,500 for 2020/21, the National Insurance Contributions (NICs) primary threshold will rise to £9,500 in April 2020, meaning an average pay increase of £104 for most employees. The government intends that by 2024, the National Living Wage will reach two-thirds of median earnings. On current forecasts, that means a living wage of over £10.50 an hour, but this is to be examined further by the independent Low Pay Commission.

The Chancellor set out several measures designed specifically to help businesses, including enhancements to certain capital allowances and research and development rules. Originally the government intended to cut corporation tax by 2% from April 2020, but this was ruled out after the General Election in December 2019. Keeping the corporation tax rate at 19% is expected to raise £46bn in year one, rising to £75bn by 2024/25.

Following strong lobbying against a possible abolition of entrepreneurs' relief, the Chancellor committed to retaining it for the present time but announced that the lifetime allowance would be reduced from £10m to £1m for qualifying disposals made on or after 11 March 2020.

Green issues also featured heavily in the Budget speech. Privately owned boats and yachts will have to use white diesel instead of the cheaper red diesel in their tanks to curb pollution; there will be further consultation on the proposed plastic packaging tax which will apply a rate of £200 per tonne of plastic packaging which does not contain at least 30% recycled plastic and the climate change levy on electricity will be frozen from April 2022, and increased on gas. There will be substantial investments in tackling nitrogen dioxide emissions in towns and cities across England and further support for the rollout of new rapid charging hubs, so that drivers are never more than 30 miles away from being able to charge up their car.

The following paragraphs summarise the key tax points arising from the 2020 Spring Budget based on the documents released on 11 March 2020. Please remember that these proposals are subject to amendment during the passage of the Finance Bill through Parliament.

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Added By: Sharon Worger on 12th Mar 2020 - 15:12
Last Updated: 12th Mar 2020 - 19:39

Number of Views: 240
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