Budget 2020

delivered in a challenging time

Budget 2020 struck a very positive tone although was delivered at a time of considerable uncertainty.

“A fiscal boost”, so said the First Chancellor, “delivered in a very challenging time”.

On personal tax and national insurance, the pensions annual allowance threshold has been announced to increase by £90,000 each from 6 April 2020 bringing the threshold income to £200,000 and the adjusted income to £240,000. The current NIC threshold will be £9,500 instead of the actual £8,632.

A number of provisions in Budget 2020 are devised to help businesses cope with COVID-19, such as the “business interruption” loans of up to £1.2m for small firms or the refund for sick pay payments for Firms with fewer than 250 staff.

Corporation tax rate remains at 19% from 1 April 2020 and saves serious money in public finances, while a Business rates review is expected in September 2020.

Business rates for properties with a rateable value below £51,000: will raise from 33% to 50% in 2020 and to 100% for 2021.

In addition, structures and building allowance (SBA) rate for reduction on qualifying expenses will go from 2% to 3% with effect from 1 April (or 6 April 2020 for unincorporated entities).

The increase in tax reliefs and the employment allowance changes will support many businesses.

The entrepreneurs’ relief limit  cut back from £10m to £1m for disposals on or after Budget Day, with the request, in certain cases, to parties to demonstrate that the transaction was entered into for wholly commercial purposes and not for the purposes of obtaining just a capital gains tax advantage.

Savings obtained through the entrepreneur’s relief rebate will fund important tax breaks from April 2020 such as:

– The increase in Research and Development expenditure Credit R&D is one of them. R&DEC is meant to be raised from 12% to 13% so to enable companies spending in R&D to claim a larger corporation tax deduction for this spend

– The increase in the maximum employment allowance by £1,000 to £4,000, giving a help to small, growing enterprises to take on staff without incurring additional NIC liabilities.

E – VAT finally, e-publications will become zero rated with effect from 1 December 2020. This will make the VAT treatment of e-books, e-newspapers, e- VAT on magazines and academic e-journals the same as their physical counterparts

VAT registered UK businesses will enjoy an important cash flow boost from 1 January 2021 thanks to the postponed accounting for VAT on all imports of goods, as a consequence of the UK’s position as an independent trading nation in international supply chains

The Chancellor not only stressed his commitment to businesses, innovation and technology but to environmental policies as well, mentioning a Plastic packaging Tax from 2022 as a part of the Climate Change Scheme.

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