Winners
All earners
An increase in National Insurance Contribution (NIC) thresholds is a welcome move for all employees and the self-employed. The threshold will increase from £8,628 to £9,500, resulting in an annual NIC saving of £104 for employees and £78 for the self-employed.
Saving for retirement
From 2020-21, the thresholds used to calculate the tapering of the annual allowance will be increased so that workers with ‘adjusted net income’ of below £240,000 are not affected by the reduced limits.
The annual allowance is the total amount an individual and employer can contribute into their pension fund without incurring a tax charge.
Children under 18 years old
Junior ISA and Child Trust Fund annual subscription limits will increase by £4,632 from £4,368 to £9,000 – a massive uplift.
Junior ISA and Child Trust Fund annual subscription limits will increase by £4,632 from £4,368 to £9,000 – a massive uplift.
Losers
Entrepreneurs
Entrepreneurs Relief (ER) Lifetime Allowance will be reduced from £10m to £1m affecting an estimated 20% of business owners. Going forward, only the first £1m of capital gains arising on the sale of an individual’s business will be taxed at 10%, with the remaining gain being taxed at 20%. Harsh anti-avoidance rules have also been introduced, backdated from April 2019.
Top earners
Currently individuals with an ‘adjusted net income’ in excess of £210,000 have their annual allowance tapered to £10,000. From April 2020, the allowance will be tapered to £4,000 for individuals with total income above £300,000. Any excess contributions over the new tapered annual allowance will be subject to tax at 45%.
Companies investment in plant and machinery
The favourable – yet temporary – Annual Investment Allowance (AIA) of £1million will come to an end on 31 December 2020, reducing by 80% to £200,000 per year.
Pensioners
The forgotten in this Budget are pensioners. With no reforms or simplification to Inheritance Tax announced, with the personal allowance and income tax thresholds remaining unchanged, and as they do not pay NIC, inflation will drag more pensioners into higher taxes. Based on forecasted inflation at 2%, many pensioners will be worse off in real terms.
For more information, please contact George Parker or Harriet James.
For press enquiries, please get in touch with David Barzilay.