budget 2020

16 March 2020

Spring Budget Update 2020

 

Capital Gains Tax Entrepreneurs’ Relief – reduction in the lifetime limit from 11th March 2020

Entrepreneurs’ Relief provides for a lower rate of Capital Gains Tax (10%) to be paid when disposing of all or part of a business where certain criteria are met, subject to a lifetime limit of £10 million of qualifying gains.

This change reduces the lifetime limit from £10 million to £1 million for Entrepreneurs’ Relief qualifying disposals made on or after 11 March 2020.

i4C has been amended to reflect this amendment.

 

Pensions Tax Changes to income thresholds for calculating the tapered annual allowance from 6th April 2020

This measure increases the income limits used in calculating a tapered annual allowance and decreases the minimum tapered annual allowance.

The threshold income, which is broadly net income before tax (excluding pension contributions), is increased from £110,000 to £200,000.

The adjusted income, which is broadly net income plus pension accrual, is increased from £150,000 to £240,000.

The minimum tapered annual allowance is decreased from £10,000 to £4,000.

i4C has been amended to reflect these amendments.

 

Lifetime Allowance

The Lifetime Allowance has increased to £1,073,100 from 6th April 2020.

i4C has been amended to reflect this amendment.

 

National Insurance
The Class One Primary Threshold has been updated to £183 per week.
The Class Two Weekly Flat Rate has been updated to £3.05 per week.
The Class Two Small Earnings Exception has been updated to £6,475 per annum.
The Class Four Lower Profts Limit has been updated to £9,500 per annum.

i4C has been amended to reflect these changes.

 

State Pension
This has been updated to reflect the increase from £8,767 to £9,110 per annum.

i4C has been amended to reflect this increase.

 

Income Tax
The following bands have been updated for Scotland:

Over £12,500*          £14,585            Starter Rate 19%
Over £14,585            £25,158            Scottish Basic Rate 20%
Over £25,158            £43,430           Intermediate Rate 21%
Over £43,430           £150,000**      Higher Rate 41%
Over £150,000**      Top Rate 46%

There are no income tax band changes for England, Wales and Northern Ireland.

 

Capital Gains Tax
The tax free allowance has been increased to £12,300 from 6th April 2020.

i4C has been amended to reflect this increase.

 

Residence Nil Rate Band
The residence nil rate band increases to £175,000 from 6th April 2020.

This is already factored into i4C.

 

Restricting finance cost relief for individual landlords
Since April 2017, tax relief on mortgage interest has been gradually phased out. By 6th April 2020, you won’t be able to deduct any of your mortgage expenses from rental income to reduce your tax bill. Instead, you’ll receive a tax-credit, based on 20% of your mortgage interest payments. This is less generous for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments under the old rules.

This is already factored into i4C.