Budget 2020

Tax changes are afoot.........

don't get caught out

As we embark on a new era of leadership, Prime Minister Boris Johnson’s cabinet reshuffle leaves an interesting debate.

 

Will the new Chancellor of the Exchequer follow the principles of the outgoing Sajid Javid? Their educational backgrounds may have been different, but both share previous careers in banking. Will this provide for a similar direction for the country’s finances?

 

The Right Honourable Rishi Sunak, MP for Richmond, carries the experience of Oxford and Stanford along with his time at Goldman Sachs before moving to a hedge fund. Some might argue that he is a novice when making decisions on fiscal policy, but the pressure is on for him to deliver his first Budget as the ‘month old Chancellor’.

 

Whilst the Governments’ manifesto revealed little on the likely detail of their first Budget, some things are certain. Below we explore some of the decisions already in transition (although we should point out that the Budget could reverse any of these changes!)

 

 

Capital Gains Tax

 

There are three significant changes to Capital Gains Tax from the 6th April 2020;

 

  • Reduction in the final period of exemption for Principal Private Residence Relief from 18 months to 9 months

  • Restriction on lettings relief – the proposed changes will mean lettings relief is only available to landlords who share occupation with a tenant.  This is a loss of £80,000 relief on jointly owned properties.

  • 30-day window for payment – from April 2020 anyone selling residential property and making a taxable gain will need to pay any capital gains tax owed and submit a residential property capital gains tax return within 30 days of completing the sale.  The cash flow impact of this is up to 21 months.

 

IR35

 

Off-Payroll in the Private Sector, more commonly known as IR35 is being aligned in the private sector to the public sector rules.  The end client will be responsible for making relevant deductions for National Insurance and PAYE at source from contractors.

 

It should be noted that this is not a change in legislation, rather a change in the way the rules are being administered.

 

 

VAT

 

The VAT Reverse Charge for construction industry services will apply from the 1st October 2020, in a bid to tackle fraud in the construction industry. The reverse charge will apply to transactions between VAT-registered businesses, and it will mean the customer is now liable to account for VAT in purchases rather than the supplier. This was originally scheduled for introduction in October 2019, but was delayed to this year.

 

Other Changes

 

Non-UK resident companies who invest in UK property will be subject to Corporation Tax going forward.  This will have impacts on the rate of tax they pay, deadlines for payment and filing as well as additional reporting requirements.

 

The Inheritance Tax residence nil-rate band is due to rise to £175,000 in 2020/21 (leading to a total allowance of £1M for a married couple).

 

The lifetime Pension Allowance is due to rise in line with the rate of inflation to £1.075m for 2020/21.

 

The National Living Wage for over-25s will increase by 50p to £8.72 per hour.

 

Pure electric cars will pay no company car benefit in kind tax for 2020/21. But this will increase to 1% in 2021/22 and further to 2% in 2022/2023.

To discuss this content or any other changes in the budget that may affect your business, please get in touch with Shafiq or Fahreen

Fairman Harris


Tel: 020 7622 0180/020 8408 7500
Email: info@fairmanharris.co.uk

Address​​​​​​: Third Floor North, 224-236 Walworth Road, London SE17 1JE

Contact Us
Members
Socialise with us