A budget for the brave and bold
Chancellor of the Exchequer Rishi Sunak has delivered the first for over a year, with a clear “don’t panic” message on the coronavirus pandemic. (It’s like telling your children not to play in the road.)
Personal tax rates and allowances
No new changes were announced, with the personal allowance staying at £12,500 this year and being indexed by RPI thereafter. UK tax rates (which apply to savings and dividend income in Scotland) are at 20% up to £37,500, then 40% over £50,000, then 45% over £150,000. With baffling complexity, the Scottish rates are between 19% and 46%.
Pensions tapered annual allowance threshold raised
Individuals with threshold income more than £200,000 and adjusted income above £240,000 lose their pensions allowance at £2 for every £1 over the £200,000. Those thresholds are up by £90,000. However the basic £40,000 allowance can now be tapered down to £4,000 instead of the previous £10,000 minimum.
Alcohol and fuel duties frozen
The cancellation of proposed increases is again presented as if it were a tax cut. Hurrah!
National Insurance Contributions threshold to increase
From 6 April 2020, the NI contrinbution threshold rises from £8,632 to £9,500. The chancellor previously said state pension credits would not be affected. This will save employees £2 per week and the self-employed £1.50 per week.
Scottish rates and bands apply to NI contributions, but the higher rate threshold is aligned with the UK. As a result, the NIC marginal rate in Scotland can be 53% for emplouees and 50% for the self-employed.
Support for self-employed affected and SSP / ESA for coronavirus victims
Employment and support allowance for the self-employed, and other individuals not eligible for statutory sick pay can be claimed from day one of the illness rather than day eight.
The intention is that NHS111 is going to issue fit notes to those who need evidence of their COVID-19 illness - but how that works when you are being asked not to phone NHS111 is unclear.
Employers are expected to meet the cost of SSP in the first instances, and in the months to come some mechanism will be put in place for them to reclaim up to 14 days SSP for employees with COVID-19.
Where the employer has to close the workplace and send health employees home, ACAS state the employees are entitled to full pay (not just SSP). And whether the employers can reclaim anything from the government is as yet unclear.
And what the chancellor pointedly did NOT do was reconsider the levels of SSP (£94.25pw) and ESA (£57.90 if aged under 25, to £114.85 for a couple with a child.) Could you live on £8 a day?
There was widespread speculation that Entrepreneurs Relief would be abolished, but that did not occur. The rules allow business owners of two years or more to pay capital gains tax at 10%, instead of 20%. The lifetime limit on for the 10% tax rate is however reduced from £10m to £1m for disposals made on or after 11 March 2020.
Firms in the retail, leisure or hospitality sectors with a rateable value of £51,000 should no business rates whatsoever in 2020/21. How that will apply in Scotland, we will have to wait and see.
Most employers are entitled to an employment allowance to reduce employers' (secondary) class 1 national insurance bills. This allowance rises from £3,000 to £4,000 I April.
Research and development
Research and development expenditure credits (RDECs) rise from 12% to 13%. This is said to be worth£2,400 on a typical R&D claim.
Making tax digital (MTD)
MTD has already arrived for VAT, but the implementation of MTD for other taxes (integrated with VAT) is being delayed. Hurrah.
COVID19: Support for businesses
HMRC is going to scale up its Time to Pay service to allow individuals and small businesses extra time to pay tax bills. A new Coronavirus Business Interruption Loan Scheme was also announced, with the government underwriting 80% of loans from banks to SMEs, but it will be at least a few weeks before the banks launch the new scheme. And former chancellor Sajid Javid was among those calling for more temporary help, such as time to pay for business rates, and lower employer NI rates
UPDATE: 17/03/2020 – the opposition is apparently going to “nod through “ the budget, so the legislation should shortly be approved.