After quite a wait, Chancellor of the Exchequer, Sajid Javid, will finally get the chance to deliver his first Budget speech on 11 March 2020.
With a new majority Conservative government, a Brexit withdrawal agreement in place and over 16 months since the last Budget we could be set for some big announcements.
We have a look at some of the tax proposals already announced as well as our predictions for what could be ahead.
What we know
The Conservative manifesto was fairly light on proposed tax changes, but it did include a few proposals which we expect to see confirmed in the Budget announcement including:
- An increase in the primary national insurance threshold for employees from £8,632 in 2019/20 to £9,500 in 2020/21. There was also a pledge to increase this to £12,500 in the future (i.e. in line with the current personal allowance).
- A review and reform of entrepreneurs’ relief, although no further detail as to what form this may take. Read our views here.
- An increase in the employment allowance from £3,000 to £4,000, however, as already announced in the last Budget this allowance will only be available to small employers with an employer’s NIC bill of less than £100,000 from April 2020.
- Corporation tax rate to be maintained at 19% rather than the previously announced reduction to 17%.
- An increase in the R&D expenditure credit from 12% to 13%
- An increase in the structures and buildings allowance rate of relief which was introduced in Budget 2018 from 2% to 3%.
- No rate increases to income tax, national insurance or VAT.
What surprises could be ahead
The majority of the above proposals are of benefit for the taxpayer so the question is how will these be funded? Increased borrowing seems most likely but there will also no doubt be the usual raft of new anti-avoidance measures, as well as possibly some shock tax announcements.
Some potential areas the Chancellor may look to pursue could include:
- Property – for a number of years now landlords have been targeted with increasing tax rates. 2020 is likely to be no exception with a proposed SDLT surcharge for overseas buyers of residential property. A possible overhaul of the SDLT rates was also mooted but did not make the manifesto. It would not be a huge surprise if other provisions are introduced to restrict relief further.
- Entrepreneurs – as mentioned above, the beneficial 10% CGT rate for disposal of qualifying business assets is likely to be overhauled or potentially even abolished. Further, as there is no scope to increase the main tax rates, an increase in the dividend rates could be an easy way to raise revenue. Narrowing the gap between income tax rates, along with the new off-payroll working rules would also help to achieve the government’s objective of pushing more people towards employment contracts.
- Inheritance tax – with the residence nil rate band fully phased in from April 2020 at £175,000 (and £350,000) per couple it seems unlikely that this will be tinkered with further as the headline £1 million threshold will be met. With little scope to change other taxes, however, some subtle changes could be on the cards.
- Pensions – with the recent headlines around NHS staff declining additional shifts due to the additional tax they could be subsequently liable to on pension contributions, we could see the tapered annual allowance scrapped or amended for defined benefit schemes.
We will be covering the Budget speech as it unfolds on Twitter (@Hazlewoods_Tax) and on our website, as well as following with analysis of the key announcements shortly after.