12 March 2020
Rishi Sunak’s first Budget was somewhat dominated by combination of coronavirus and making sure no-one forgot Boris Johnson’s ‘getting things done’ mantra. As ever, though, an afternoon trawling through the more detailed publications on tax relevant aspects of the Budget reveals much more than could be gleaned from listening to the live version. As has become customary, we’ve picked out a Tax Top 5 that we think will interest our client base:
1 – Entrepreneurs’ Relief
A more hotly speculated announcement is hard to remember, many in our industry anticipating a wholesale withdrawal of this capital gains tax relief.
A cut to the lifetime limit from £10m to £1m is almost as good as an abolition and may be a stepping stone to full removal in a later year, but perhaps more surprising were the anti-forestalling measures. These seek to counteract what was presumably a perceived widespread attempt to ‘beat the rules’ by putting in place pre-announcement arrangements intended to preserve the relief despite no genuine business disposal being effected until the Chancellor had shown his hand.
Those with businesses which may be sold in the short to mid-term may be well advised to consider their ownership structure and how the implications of this change are going to affect them.
2 – Pensions Annual Allowance Relief
Most widely publicised by their impact on senior NHS clinicians, the personal tax charges which impact higher earners who ‘over-contribute’ to their pension schemes have been affecting more and more of our clients each year.
It will therefore be welcome news that from April 2020 the tapering thresholds for tax efficient pension contributions currently set at £110,000 (income) and £150,000 (income plus pension contributions) are increased to £200,000 and £240,000 respectively.
There is a sting in the tail for still higher earners, though, with the minimum tapered allowance of £10,000 being reduced to £4,000, whacking another potentially £2,700 onto the tax bill of those earning over £292,000 and breaching their pension contribution allowance.
With a few weeks until tax year end the old adage of use your pensions allowance or lose it remains as true as ever.
3 – National Insurance
A rise in the threshold above which NI is paid from £8,632 to £9,500 might not seem all that noteworthy. But it makes our top 5 mainly on the basis that it stems from an election promise and that within the spirit of that election promise it ought to be step 1 in a series of rises whereby the income tax and NI allowances move towards being harmonised. Getting it done indeed.
4 – Low Emission Cars
We had been about to enter a 12 month ‘sweet spot’ when, on 6 April, there was going to be a one year overlap between vastly reduced benefit in kind charges on green vehicles and first year tax relief for companies buying such vehicles.
That sweet spot is now looking like it’ll last 5 years, with first year allowances for ‘green’ cars being extended from April 2021 to April 2025, a concession the Chancellor attributes to the intended ban on new fossil fuel cars being accelerated from 2050 to 2035.
As ever there’s some taking with the right hand of what’s given with the left, 100% allowances currently permitting emissions of up to 50g/km of CO2 but with 0g/km being required WEF April 2021 (and for anyone interested, the emissions threshold for main or special rate capital allowances reduces from 110g/km to 50g/km at the same time).
Nonetheless, we’re now entering a golden age for owner managers who’ve had their eye on an electric car, with the dual prospect of generous up front business tax relief whilst personal tax charges for enjoyment of the car are kept minimal.
5 – Review of the EMI Scheme
We always like to have a curve ball amongst our top 5, and not only was this measure not mentioned in the Chancellor’s speech, it didn’t even merit a mention on Gov.UK’s page of ‘tax related’ announcements.
Buried away on page 90 something of the red book was a short paragraph announcing that there’ll be a review announced later this year into the EMI scheme “ to ensure it provides support for high‑growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme”.
Call us cynical, but simplification usually makes things more complicated and improving fairness usually means withdrawing relief from some group or other.
So whilst this sounds like the scheme might be extended to ‘more companies’ we can’t help but wonder if the reference to high-growth and scaling up might be a veiled threat. For instance bringing the kind of company age cap or ‘knowledge intensive company’ requirements of the EIS scheme into the EMI scheme so that the list of excluded trades or entities ends up growing.
If we were thinking of rolling out an EMI scheme (and we’re not, not least because accountancy is already on that list of prohibited trades!) we think we’d be making hay whilst the sun’s still shining.
You can view our full 2020 Budget Summary here.
If any of the above relates to your circumstances and you’d like to find out more, please contact John Sheehan or Graham Boar or your local UHY adviser.
