The Budget on 11 March 2020 came as the UK began to feel the full effects of coronavirus. In amongst the initial measures introduced to support individuals and businesses affected by the pandemic, there were a number of key announcements in respect of the tax system.
Income tax
The income tax rates and tax bands are unchanged from 2019/20 to 2020/21.
National Insurance
Whilst National Insurance rates are unchanged, there is the usual increase to the thresholds. Directors whose salary from the company is set at a level just below the threshold where National Insurance becomes payable can receive a modest pay rise for 2020/21.
Corporation tax
It was announced a number of years ago that the rate of corporation tax would reduce from 19% to 17% with effect from 1 April 2020. Not only was the planned reduction cancelled some time before the Budget, but it is now confirmed that the 19% rate will be in place until at least 31 March 2022.
Capital gains tax
The main change is that the lifetime limit on capital gains qualifying for entrepreneurs’ relief (ER) was reduced from £10 million to £1 million with effect from Budget day. Prior gains on which ER has been claimed count towards the revised limit, so some individuals will have already used their full ER limit.
Disposals of UK residential property by UK resident individuals must now be reported to HMRC and any tax liability paid within 30 days of completion.
The capital gains tax annual exemption is increased to £12,300 for 2020/21.
Pensions
The amount of pension savings on which most individuals can claim tax relief remains at £40,000 per annum. There is an increase in the income thresholds above which the £40,000 pension savings limit is gradually reduced for ‘higher earners’, which will be of benefit to some. However, the minimum savings limit is reduced from £10,000 to £4,000 for the highest earners, which will see those individuals lose out.