With 2019 being the first year in over a century without a Budget, and especially following Sajid Javid’s shock resignation, individuals and businesses across the UK are awaiting the new Chancellor, Rishi Sunak’s Budget announcement, still confirmed for 11th March 2020, with baited breath. As the Budget nears, our partner John Griffin has set out his personal predictions on what it may contain – and, significantly, what this could mean for businesses.
- Reduction in the benefit of Entrepreneurs’ Relief. The Government has promised a review, and subsequent reform, of this relief; and, if last year’s changes are anything to go by, shareholders may well be facing a decrease in the relief’s qualifying conditions.
(See separate article on Entrepreneurs relief here) - Changes to tax relief on pension contributions, especially for higher rate taxpayers. Basic rate taxpayers currently receive 20% pension tax relief, whilst higher rate taxpayers can claim 40% and additional rate receive 45%. With the cost to the Government of this relief rising due to the effects of pension auto-enrolment, we may see these percentages change before long.
- Abolition or amendment of the pension contribution annual allowance taper for earners in excess of £150,000. Presently, the annual allowance is capped at £40,000, with higher earners facing a £1 reduction for every £2 their adjusted income exceeds £150,000. Given the hints at reviews to pensions, there may well be changes to the annual allowance taper on the horizon.
- Reduction in the 25% tax-free pension pot lump sum. As things stand, up to 25% of the amount an individual has accrued in their pension fund can be withdrawn as a lump sum, free of tax. It’s possible that this amount will be reduced as a cost-saving measure.
- Reduction in the rate of VAT. With the Conservatives’ manifesto having pledged not to raise the rates of VAT, National Insurance or Income Tax, it seems feasible that VAT may even come down in a boost to businesses.
- Lowering of National Insurance Contributions for employees. The earning threshold for employees paying NICs is expected to rise to £9,500 with the upcoming Budget, and is set to rise a further £3,000 thereafter. Those earning over the £9,500 figure would receive a reduction in their liability of £85 per person per year: a significant amount over time.
John Griffin said: “With all the spending commitments pledged in this Government’s election manifesto, money will need to be raised to pay for them and it may become painful for higher rate tax payers and entrepreneurs. As always, once the Budget has been held, if you feel that any of this will affect you then take professional advice as soon as possible in order to try to mitigate any downsides.”
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