Budget 2020 Predictions
4th Mar 2020
How will Coronavirus affect the Budget?
According to The Guardian, the Budget would ‘prioritise economic security’ in the face of a growing threat from the coronavirus. This may mean some major announcements are postponed to a future Budget or Autumn Statement. The exact coronavirus-related measures that the Budget will include are unclear, but according to the BBC, Rishi Sunak has ‘ordered Treasury officials to work up plans to support the public health response, businesses and the economy in his Budget on 11 March’.
Government plans released today say that in a worst-case scenario, up to a fifth of the UK workforce could be absent from work at any one time.
IR35 for Private Sector
The government has already confirmed it will make changes to off-payroll working rules known as IR35 in time for the next tax year. IR35 was introduced to make sure people working as employees via personal services companies (PSCs) are taxed similarly to other employees. This legislation is likely to effect up to 170,000 individuals across 60,000 organisations. While this policy change has already been announced, we may possibly see it confirmed in the Budget.
Pension tax relief
Reforms to pension tax relief are also being considered as a money-raising measure. Currently, workers receive pension tax relief at the rate they pay income tax. So basic-rate taxpayers receive 20% pension tax relief and higher-rate taxpayers 40%. The potential new plan would see a flat pension tax relief rate of 20%, meaning higher earners’ pensions would be affected.
There is a cross-party proposal to cut inheritance tax to 10%, down from its current rate of 40%. A number of tax-free allowances would also be dropped. Currently, gifts between family members are tax-free if gifted seven years before the giver dies. The group is calling for this rule to be scrapped in an effort to stop owners of larger estates avoiding taxes by giving away their wealth and surviving seven years. There would also be a £30,000 cap on cash gifts over a lifetime. It’s unclear exactly how many people these changes would affect.
Boris Johnson controversially promised a tax cut for high-earners during his Tory leadership campaign. But those plans were ditched in the run-up to the December general election. Now, the focus is on raising the threshold for National Insurance contributions (NICs) to £9,500 in the next tax year, and eventually to £12,500 over a number of years. Currently, you have to pay 12% NICs on earnings over £8,632. If the chancellor confirms this election promise, this tax will only be payable on earnings over £9,500. If you earn £25,000, you’d pay £1,964 in NICs under the current rules. With the increased threshold, you’d pay £1,860 – around £100 less.
Former Chancellor Sajid Javid was expected to cut entrepreneurs’ relief – a tax break that allows company owners to pay less capital gains tax when selling their businesses. However, rather than remove entrepreneurs’ relief altogether, Mr Sunak may perhaps alter this so it is only aimed at small businesses.
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