Budget 2020: Getting things done
Rishi Sunak’s first budget as Chancellor (and the UK’s first Budget since 2018) brought with it a real sense of anticipation, writes Matt Herd, Personal Tax Director, Ensors Chartered Accountants. As ever, rumours of fundamental changes to certain areas of the UK tax system were rife, with business owners, in particular, watching closely for restrictions to business reliefs.
Even before Mr Sunak had taken to the despatch box on the 11th of March, the Bank of England had already announced a cut in interest rates to shore up the economy amid the coronavirus outbreak. Policymakers reduced rates from 0.75 per cent to 0.25 per cent, taking borrowing costs back down to the lowest level in history. Mark Carney, the outgoing governor of the Bank of England, said that the Bank's co-ordinated action on Budget day was designed to have “maximum impact".
Most commentators agree that Mr Sunak cut a very impressive figure as he delivered his speech, demonstrating an engaging and charismatic character - not traits commonly demonstrated by Philip Hammond.
As was to be expected, the Chancellor started by addressing the action being taken by the government in response to coronavirus, unveiling a £30bn package to boost the economy and get the country through the outbreak.
Measures to mitigate the effect of the outbreak include statutory sick pay for all those who are advised to self-isolate, suspension of business rates for certain businesses with a rateable value below £51,000 and a promise from the government to meet the cost of providing statutory sick pay to those off work because of coronavirus for businesses with fewer than 250 employees.
The chancellor went on to announce significant spending on transport, infrastructure and housing including:
- More than £600bn to be spent on roads, rail, broadband and housing by the middle of 2025
- £2.5bn available to fix potholes and resurface roads in England over five years
- A new £1bn fund to remove unsafe combustible cladding from housing higher than 18 meters.
Despite the fact that there are to be no increases to the main income tax allowances or extension of the rate bands from 6 April 2020, the majority of the announcements in relation to personal tax, wages and pensions are likely to be viewed positively by the taxpayer.
As detailed in the Conservative manifesto, the chancellor confirmed that the National Insurance Primary and Lower Profits thresholds will increase to £9,500 in 2020/21. A change that will see many workers save over £100 a year.
Stamp Duty Land Tax
Despite rumours of a reduction in the top-rate of Stamp Duty Land Tax. The only announcement made by Mr Sunak was the introduction of a 2 per cent Stamp Duty Land Tax surcharge for all purchases of residential property by non-UK residents, in addition to other Stamp Duty Land Tax payable.
Contrary to rumours that the level of income tax relief available to higher earners may be restricted, the chancellor announced an increase to the threshold at which an individual’s £40,000 annual allowance is tapered. From April 2020, the level of “adjusted income” above which an individual will start to see their annual allowance begin to taper down will increase by £90,000 to £240,000. At the same time, the minimum tapered allowance will reduce from £10,000 to £4,000.
The chancellor made these announcements claiming to have “listened to concerns that the pensions tax system is preventing Doctors from taking on more hours” and suggested that the changes “will take around 98 per cent of consultants and 96 per cent of GPs out of the taper altogether”.
Alcohol, tobacco and fuel
Despite pressure from environmental groups, the chancellor announced that Fuel duty is to be frozen for the 10th consecutive year.
Duties on spirits, beer, cider and wine are to be frozen with Tobacco taxes continuing to rise by 2 per cent above the rate of retail price inflation. This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars
Inheritance Tax and “Mansion Tax”
Nothing appears to have come of rumours that Boris Johnson was looking to introduce a ‘Mansion Tax’ on Britain’s most expensive properties and although the chancellor did not make any announcements relating to the reform of the Inheritance Tax system, an overhaul of the current rules in the near future seems a distinct possibility.
Although there appear to have been more winners than losers as a result of Rishi Sunak’s first Budget, it is worth remembering that an autumn Budget is anticipated later in the year. Will Mr Sunak be able deliver an equally charismatic performance if he finds himself announcing tax increases to pay for the UK’s response to coronavirus? (hopefully at a time when the country and economy will be starting to recover from the effects of the outbreak).