Delivering his first Budget as Chancellor, Rishi Sunak promised to support individuals and business as the country tackles the coronavirus threat. Business rate cuts, cash grants for small enterprises and support for both employees and employers on sick pay were among the emergency announcements designed to mitigate the impact of the outbreak.
The statement also included a range of increased spending plans for the NHS, housing, research & development, flood defences and road infrastructure.
Facing huge uncertainty surrounding the coronavirus, and following a Bank of England reduction in the base rate earlier in the day, the Chancellor’s plan is expected to increase borrowing by £3.1 billion on average from 2020-21 onwards.
Plans include an increase to the threshold before National Insurance contributions are deducted to £9500 from next month and raising the living wage to £10.50 per hour by 2024.
To cushion the impact of coronavirus on business, retail, leisure and hospitality companies occupying premises with a rateable value of less than £51,000 will receive a rates holiday for the coming year.
As predicted, there was a reduction in the lifetime allowance on gains eligible for Entrepreneurs’ Relief which provides a reduced 10% rate of Capital Gains Tax on qualifying disposals. The lifetime limit will be reduced from £10 million to £1 million per person with immediate effect.
In another widely expected income-generating measure, the Chancellor announced a 2% surcharge in Stamp Duty Land Tax (SDLT) for non-resident purchasers of property, a move that is expected to hit UK expats living and working overseas as well as foreign investors.
Many of the imminent tax changes were announced in previous Budget statements, including those affecting Capital Gains Tax on property disposals. This has resulted in incremental changes to lettings relief and final period exemptions for those who sell homes that are not fully eligible for Private Residence Relief. This affects anyone completing a sale after 5 April 2020 of any property which has at some time been their principal private residence.
Also at the final stage is the incremental introduction of changes to landlords with buy-to-let mortgages. From April 2020, landlords who own rental properties in their own names will no longer be able to deduct any mortgage interest or other finance-related costs from their rental income before calculating their tax liability, a process which previously benefited higher rate taxpayers. The tax relief has now been replaced by a 20% tax credit for finance-related costs.
There were some surprises. The anticipated announcement on inheritance tax, following the recent consultation, wasn’t forthcoming. Together with the shift in entrepreneurs’ relief and capital gains taxation on property, this makes forward planning an ongoing priority. Both homeowners and business owners should be mindful of efficient tax planning in order to protect their pension or inheritance for the next generation.
Anyone planning to sell their business in the next few years should seek advice on how to extract value prior to sale, for example, through increased employer pension provision.
For individuals, long term planning for asset transfer or considering the use trusts may also prove helpful.
