Budget – 2 months on
It is easy to forget that there was a Budget, the first for some 18 months, in early March and at some point there will be one or more follow-ups to start the process of repaying the Exchequer for the financial assistance currently being provided.
Tax rates will undoubtedly have to rise and this needs to be borne in mind when considering trading projections and liabilities, and their timings, thereon.
There were no changes to the personal allowances and tax rate bands for the year ending 5 April 2021.
- The standard personal allowance is £12,500. The allowance is reduced by £1 for every £2 of income over £100,000
- The basic rate band is £37,500. This means that, taking the personal allowance into account (but ignoring any tax relief due on Gift Aid and pension payments), income has to exceed £50,000 before the higher rate of tax of 40% takes effect
- The higher rate of 40% is then applied on income from £37,500 to £150,000
- The additional rate of tax of 45% applies to income over £150,000
The dividend allowance of £2,000 remains in place whereby the first £2,000 of dividend income is exempt. The excess over £2,000 is charged at 7.5% up to the basic rate band limit; 32.5% up to the higher rate band limit and 38.1% over that limit.
The off-payroll working (IR35) rules for the private sector scheduled to take effect from 6 April 2020 have been deferred by 12 months.
The year ended 5 April 2020 is the final tax year of the phased reduction in let property loan interest tax relief. For this year, 25% of qualifying interest attracts higher rate tax relief and the balance of 75% at the basic rate. From 6 April 2020, relief for loan interest paid will be at the 20% basic rate only.
From 6 April 2020, UK residents will be required to file a Capital Gains Tax (CGT) Return where a UK residential property has been sold realising a gain. The CGT Return needs to be filed and the estimated CGT due paid within 30 days of the completion date.
From 11 March 2020 the lifetime gains limit for Entrepreneurs’ CGT Relief is reduced from £10million to £1million although the rate of tax remains at 10%.