Today the UK government announced its Budget for 2020-21.
Much of the focus was on immediate support for Coronavirus hit business and public services as well as investment in to longer term infrastructure projects.
There were not many headline grabbing tax changes for individuals but there are some points worth highlighting as follows:
- Changes to pension limits and tapering of annual allowances
- Changes have been introduced which were presented by the chancellor as being for the benefit of high earning doctors and surgeons working for the NHS. In fact these changes will benefit any pension savers whose earnings are between £150,000 and £300,000, but will have a negative impact for those whose earnings exceed £300,000.
- Currently, the £40,000 annual pension savings allowance can taper down to a maximum contribution of £10,000 for individuals with ‘adjusted income’ for a tax year above £150,000 subject to their ‘threshold income’ exceeding £110,000. Both income limits have to be exceeded before a person is affected by the tapered annual allowance. The annual allowance is reduced by £1 for every £2 of adjusted income above £150,000.
- The two tapered annual allowance thresholds will each be raised by £90,000 and the minimum tapered annual allowance will be decreased from £10,000 to £4,000 from 6 April 2020.
- The point at which an individual is assessed for the taper, will be £200,000, and the adjusted income limit - the point at which the annual allowance begins to reduce - will be £240,000.
- Anyone with adjusted income in excess of £312,000 in 2020-21 can expect to face the £4,000 pension limit.
- Capital Gains Tax: Reduction in the Entrepreneurs’ Relief lifetime limit – From 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) will be reduced from £10 million to £1 million. There are no transitional provisions. The reduced limit applies to all transactions which complete on or after today.
- Non-UK resident Stamp Duty Land Tax (SDLT) surcharge – The government will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.
- Tax rates and allowances – the income tax rates and tax bands remain unchanged for 2020-21. There has been no increase to the income tax personal allowance at £12,500. The CGT rates remain the same. The Annual Exempt Amount rises from £12,00 to £12,300
- ISAs, Junior ISAs and Child Trust Fund limits – The ISA contribution limit remains unchanged at £20,000 but the annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.
If you would like to discuss the impact for you of these measures in more detail please contact us to arrange a tax consultation.