On Wednesday 11 March 2020, Rishi Sunak delivered his first Budget.
Changes Previously Announced
- Off-Payroll Working – implementation into the private sector from April 2020 (now postponed)
- National Minimum Wage – increased rates
- Employment Allowance – restricted to those with employers NIC liabilities of below £100,000 in the previous tax year (and also recategorized as state aid, having an implication for some claimants)
- Statutory redundancy – maximum rate increased to £538 per week
- Short time working – “Lay-off” pay increased to £30 per day
Changes announced (applying from April 2020 unless noted)
- National Insurance – Primary threshold, employees and employers, increasing from £8,632 to £9,500 per annum
- Statutory Sick Pay, where absence due to Coronavirus – can be paid from day one of sickness absence, including for those who self-isolate. For employers with less than 250 employees, SSP costs for up to 14 days will be refunded by the Government
- Employment Allowance – will increase to £4,000 (but a restriction in entitlement has already been announced, see below)
- Time To Pay arrangements – additional HMRC staff to support applications, taking account of expected hardship due to the impact of Coronavirus
- Company cars and vans, benefits where private use available:
- Company car private fuel provided – increase in fuel multiplier to £24,500
- Company van benefit, where private use permitted – increased to £3,490
- Company van fuel benefit – increased to £666
- Tackling tax avoidance and evasion – further action to be taken expected to raise £4.7 billion between now and 2024-25
- Additional funding for HMRC
- Restriction of CIS tax refunds for non-compliant businesses
- Further action against promoters of tax avoidance
- NIC holiday for employing veterans (from 21/22) – no employer NIC in first year of civilian employment of a veteran. Capped at NIC Upper Earnings Limit, consultation on design to take place
- Welfare counselling tax exemption – extended to include related medical treatment (such as cognitive behavioural therapy as part of an employer’s welfare counselling services
- Home working, flat rate deduction – increased from £4 to £6 per week
- Neonatal leave and pay – entitlement to up to 12 weeks leave and pay for employees whose babies spend an extended period of time in neonatal care
- Carers’ leave – a new in-work entitlement for employees with unpaid caring responsibilities. Consultation to take place before further details announced
- Entrepreneurs’ Relief – with effect from 11 March 2020, the lifetime ER gains allowance is reduced from £10m to just £1m.
- In order to address the issue of high earners and in particular senior medical professionals being hit with tax charges where their pension annual allowance is breached, the current thresholds for taper of annual pension allowance from £40,000 down to £10,000 are changing. At present the tapering applies if ‘threshold income’ exceeds £110,000 and ‘adjusted income’ exceeds £150,000. From 6 April 2020 the tapering will apply where ‘threshold income’ exceeds £200,000 and ‘adjusted income’ exceeds £240,000. In addition the minimum tapered annual allowance is reduced from £10,000 to £4,000.
- Corporation Tax rates are frozen at 19% for the financial years beginning 1 April 2020 and 2021
- Research and Development Tax Credit (RDEC) is increasing from 12% to 13%
- Tax Relief for expenditure on new business structures and buildings (SBA) is increasing from 2% to 3% per annum
- As announced in the 2018 budget, the new Digital Services Tax comes into force at the rate of 2%
- Further anti-avoidance measures to reinforce the Government’s position of tax planning avoidance and evasion
- Abolition of small business rates for retailers for a year plus a £3,000 cash grant for any company eligible for small business rates relief
- 0% on Women’s Sanitary Products with effect from January 1st (removing 5% which was the lowest rate possible under EU VAT Directive)
- Import VAT Accounting from 1st January 2021 will be ‘postponed accounting’ for ALL imports (not just former EU Acquisitions).
- Removal of 20% VAT on Digital Reading Materials from December 1st ie online newspapers, magazines, journals etc, aligning them with physical versions which are already 0%.
- SDLT: a temporary increase in the Nil Rate Band of Stamp Duty Land Tax on residential property in England and Northern Ireland from £125,000 to £500,000 from 8 July 2020 to 31 March 2021.
- VAT: a temporary reduction in VAT from 20% to 5% in the period from 15 July 2020 to 20 January 2021 on: (1) Supplies of food and non-alcoholic drinks, both eat-in and take-away (for hot food). ; (2) Accommodation (hotels, etc); and (3) Entrance Fees for Attractions (theme parks, etc) CJRS ends on 31 October
- Green Homes Grant: 2/3 of the cost (up to £5000) of making a home more energy efficient. This applies to both homeowners and landlords.
- Job Retention Bonus: paid to employers who retain their furloughed staff. A one-time payment of £1000 for every furloughed employee who remains continuously employed until 31 January 2021. Employees must be paid, on average, a minimum of £520 per month from 1 November 2020 to 31 January 2021. Payments will be made in February 2021.
- Kickstart Scheme to fund new jobs for younger people. The Treasury pays the National Minimum Wage (plus Employers’ National Insurance Contributions and minimum auto-enrolment pension contributions) for 25 hours per week, for 6-month work placements for those aged 16-24 who are on Universal Credit
Frequently Asked Questions
Will the rise in the stamp duty threshold apply to second homes?
Yes. The 3% rate for additional properties now applies up to £500,000.
Does the stamp duty threshold rise in Rishi Sunak has announced apply in Scotland and Wales?
No. But the devolved administrations usually make similar changes to LBTT and LTT.
What could changes in the stamp duty announcement mean for first time buyers?
First time buyer’s relief is abolished as any purchase up to £500,000 is exempt until 31/3/21, so no longer needed.
Will HMRC backdate SDLT claims to accommodate the new changes?
What about a house with a granny annexe or other subsidiary dwelling?
Sometimes a property counts as two or more dwellings and it is possible to reduce the SDLT by claiming multiple dwellings relief.
Care now needs to be taken because sometimes the effect of claiming multiple dwellings relief could be to increase the amount of SDLT! This is because of the 1% rule.
Take for example a property bought for £600,000 where there is an annexe which is sufficiently self-contained to count as a dwelling in its own right.
- SDLT without claiming multiple dwellings relief is calculated at 0% on the first £500,000, then at 5% of the next £100,000 to give SDLT of £5,000.
- If multiple dwellings relief is claimed, the 1% rule applies, so the SDLT would be £6,000.
What about a property with a field?
It can be a grey area whether properties which come with paddocks and fields counts as “residential property” or as “mixed use property“. Previously it was almost always the case that the SDLT would be less if the property counted as mixed use. That is now turned on its head for properties worth under £1,215,000.
Take for example a house with a field being sold for £900,000.
- At standard residential rates the SDLT would work out at £20,000.
- At mixed-use rate the SDLT would work out at £34,500.
I completed my property purchase yesterday for £500,000 but have 14 days to pay the stamp duty to HMRC. Do I get the benefit of the abolition of stamp duty up to £500,00?
No, unfortunately, the change is not retrospective and you will have to pay the stamp duty of £15,000 (or £30,000 if it’s a second home).
How much is the stamp duty cut worth on second homes at £500,000?
From 8 July you pay £15,000 instead of £30,000.