This afternoon, the Chancellor of the Exchequer, Rishi Sunak shared the highly anticipated Budget with Parliament. In a contrast to last year’s financial announcements, the spotlight was taken away from our exit from the European Union and instead placed a heavy emphasis on the recent outbreak of Coronavirus in the UK, and what its effects could mean for our economy.
You may be wondering which parts of the Budget could affect you and your finances over the next few months.
Here is our overview of the key takeaways:
Off-Payroll (IR35) reforms
The controversial private sector off-payroll reforms will go ahead from 6 April 2020*. Although the chancellor did not reference the reforms in his speech directly, the ‘red book’ issued after the speech confirmed the following:
‘The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020*, as previously announced.’
In the lead up to the budget there was talk that changes to Entrepreneurs Relief (ER) were coming, with some commentators that the chancellor would go as far as scrapping the relief entirely. Today, the chancellor announced that the relief will not be scrapped, however the lifetime limit will be reduced from £10 million to £1 million.
The personal allowance remains frozen at £12,500. This is the allowance before 20% tax is applied to your personal income. Also frozen is the £50,000 threshold at which individuals start to pay the higher 40% rate of income tax. The rate of corporation tax is also remaining the same at 19%.
The chancellor confirmed plans to increase the threshold before employee’s national insurance contributions are due to £9,500 from 6th April 2020, with plans to ultimately increase this to £12,500.
Increase to National Living Wage (NLW)
As already confirmed, from 6th April 2020, the NLW will increase to £8.72 from £8.21.
The previous chancellor proposed limiting tax relief on pensions to 20%, however, prior to the budget, Mr Sunak ruled out these changes. He did, however, announce reforms to the complicated way taper relief is applied for higher earners.
Use of Home as Office Claim
Outlined in the paperwork is that the flat rate claim for working from home will from April 2020 increase from £4 per week to £6 per week.
Want to know more?
For a comprehensive run-down of the changes announced in the 2020 Budget, download our report below:
* Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.