Here are the points arising in the budget that we would like to draw to your attention. Our full budget report will be available in the coming days.

Entrepreneurs Relief

It was widely reported that this valuable relief might be abolished. It was claimable on appropriate lifetime gains up to £10 million. The measure taken was to retain the relief, but reduce the lifetime limit to £1 million for qualifying disposals made on or after 11 March 2020.

The relief applies to those qualifying individuals who dispose of all or part of their business, or shares in their personal trading company and provides for a lower rate of capital gains tax of 10%.

The rules will also provide that the new lifetime limit must take into account the value of Entrepreneurs Relief claimed in the past.

This change should mean that small business will be largely unaffected and will still have a decent limit to claim the relief when they sell their business or withdraw capital funds from their company on retirement/cessation of trading.

Bigger businesses will be adversely affected and it will mean that the 10% rate will be replaced by the higher rate of capital gains tax of 20%.

Rules will also be introduced to apply the effect of the change retrospectively, for arrangements entered into before budget day, unless –

  • The parties to the contract demonstrate that they did not enter into the transaction with a purpose of obtaining a tax advantage from a timing perspective
  • If the parties are connected, the contract was entered into for wholly commercial reasons
  • Where shares are exchanged for those in another company, between 5 April 2019 and 11 March 2020, both companies are not owned by substantially the same persons, or persons who held
  • shares in company A do not hold a greater percentage in company B

Corporation Tax rate

It had previously been legislated that the company rate of tax would reduce to 17% from 1 April 2020. This has been reversed and the current rate of 19% will now continue for the next 2 years.

Employment Allowance

This is given to qualifying employers against their Employers National Insurance contributions in each tax year and currently amounts to a maximum of £3,000. This will be increased to £4,000 from April 2020.

VAT on digital publications

Printed books, magazines and leaflets are currently zero rated for VAT. The zero rate will be extended to digital publications as well from 1 December 2020.

Pensions – changes to the annual allowances

The Chancellor announced some specific measures to alleviate the problem facing doctors, many of whom could have faced large tax bills for working additional hours.
The ‘threshold income’ – the amount you can earn before having to calculate a reduced pension saving allowance – is being increased from £110,000 to £200,000.
This will remove the problem for the vast majority of high earners. However, those with income over £300,000 could see their pension allowance cut further. Once their income reaches £312,000 it reduces to £4,000.

Income tax – no change

There is no change to the personal allowance and rates, which remain at £12,500, 20%, 40% and 45%.

MARCH 2020