New chancellor promises to support individuals and business as country tackles 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 tackle the impact of the coronavirus in Chancellor Rishi Sunak’s first Budget, presented to parliament just four weeks after his unexpected promotion to the role.
The statement included a range of other headline-grabbing figures as he outlined a post-austerity spending plan that included big budgets for everything from the NHS and housing to research & development. There was funding for flood defences and road infrastructure, including a hefty pot of cash to spend on tarmac, enough to fill 50 million potholes in roads according to the Chancellor.
In a Budget designed to secure economic stability in the face of the 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 the promise of the living wage rising to £10.50 per hour by 2024.
Also confirmed was a set of measures to cushion the impact of coronavirus on business, with retail, leisure and hospitality companies occupying premises with a rateable value of less than £51,000 receiving a rates holiday for the coming year.
Growth forecasts, made before the virus hit, stand at 1.1% in 2020, then 1.8%, 1.5%, then 1.3% and 1.4% in the following years, all down from last year except for 2021.
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. From today (11 March 2020) the lifetime limit will be reduced from £10 million to £1 million per person.
Another widely expected income-generating measure was the Chancellor’s announcement of a 2% surcharge in Stamp Duty Land Tax (SDLT) for non-resident purchasers of property, a move that will 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, which has seen 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 property sale after 5th April this year for any property which has at some time been their principal private residence.
Another is the final stage of 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.
Fiona Ashworth, Head of the TSP Wills and Estates team, said: “This was a Budget which followed through on many election promises, while putting the threat of the coronavirus centre stage.
“There were some surprises – for example, we had anticipated an announcement around inheritance tax following the consultation that has been taking place, but that didn’t happen. This, together with the shift in entrepreneurs’ relief and capital gains taxation on property, make forward planning an ongoing priority. Both homeowners and business owners need to do efficient tax planning if they wish to protect their pension or inheritance for the next generation.
She added: “ Anyone planning to sell their business in the next few years should certainly be working with their advisers to look at ways of extracting value prior to sale, for example through increased employer pension provision.
“For individuals, long term planning for asset transfers may be on the agenda as well as considering whether using trusts could be helpful.”