Budget Summary 2020/21

A long time in politics

On 12 December 2019, the most important issue in the General Election appeared to be Brexit. On New Year’s Eve, Rishi Sunak was Chief Secretary to the Treasurer – Chancellor Sajid Javid’s second-in-command – and no one had heard of Coronavirus. When Mr Sunak took over as Chancellor on 13 February, with four weeks to prepare a Budget speech, there were only a handful of cases of the illness in the UK. In that short time, Covid-19 has become the starting point of a series of measures that the Office for Budget Responsibility described as the biggest fiscal stimulus since 1992. There seemed to be no end to the giveaways – £30 billion in all – and very little tax raising (even a freeze on alcohol and fuel duties). It seemed very different from the austerity of most of Philip Hammond’s Budgets.

What the Chancellor says in the House is only part of the story. When he sits down, the Government publishes everything on the internet – measures he hasn’t mentioned; the devilish detail of things he only touched on; and the tables of financial estimates that show what makes a big difference to the public finances and what is marginal. This booklet summarises the most important points and explains how they affect businesses and individuals. We have included some of the changes that were announced in previous years and are about to come into effect – and some that we can look forward to in the future.

The Coronavirus outbreak has created unprecedented uncertainty, and it is impossible to know whether the proposed measures will be enough. The Chancellor mentioned another Budget coming in the Autumn – presumably we will have a better idea then of how we and the rest of the world have coped, as well as being clearer on the outcome of the Brexit negotiations with the EU. In the meantime, we will be happy to discuss the present proposals with you and help you understand the implications for your finances.

Significant points
  • £12 billion package of measures to help individuals and businesses cope with Covid-19.
  • Increase in employee and self-employed NI contribution threshold to £9,500 for 2020/21.
  • Immediate cut in lifetime gains eligible for Entrepreneurs’ Relief from £10m to £1m.
  • Increase in thresholds for pension relief Annual Allowance tapering to £200,000/£240,000.
  • Off-payroll working rules extended to private sector employers as previously announced.
  • Employment Allowance increased for 2020/21 to £4,000 of employer’s Class 1 NIC.
  • 30-day deadline for reporting and paying CGT on residential property applies from 6 April.


Budget Summary 2019/20

Trick or Treat?

Philip Hammond joked that he had avoided giving his speech on Halloween night itself because it would have been simply too tempting for the caption writers, and had avoided Christmas because he did not want to appear in cartoons disguised as Santa Claus. Even so, he was determined to honour the Prime Minister’s recent declaration that austerity was over. He repeated again and again that ‘the British people’s hard work has paid off’ and the fiscal rigour of the past eight years has allowed him at last to share out some of the benefits.

Mrs May had already committed £20 billion of spending to the NHS, but Mr Hammond still managed to raise tax allowances to the level promised for 2020 in the election manifesto a year early, a tax ‘giveaway’ of nearly £3 billion next year. Other big figures include the freeze on fuel duty for the ninth successive year, help for the transition to Universal Credit, a temporary increase for tax allowances on plant and machinery, and extra relief from business rates for small retailers. Very few tax raising measures were announced, even in the small print of the mass of information that is released on the internet when the Chancellor sits down. There really has not been a Budget like this in recent years.

The great unknown, of course – not quite an elephant in the room, because the Chancellor did refer to it – is the outcome of the negotiations with the EU on the terms of our leaving. If we get a good trade deal, as the Chancellor confidently expects, there will be a ‘double dividend’ – an end of uncertainty, and no more need for the reserves he has been holding back in case we do not reach agreement. If ‘no deal’ is the outcome, he hinted that the outlook would then be so different that it might be necessary to upgrade the Spring Statement to a full ‘fiscal event’ – another Budget with a different plan.

An opposition MP shouted that Mr Hammond ‘won’t be here next year’. He affably responded that she had made the same interjection during his previous two Budgets as well. He clearly expects to implement the plans that are summarised in this booklet. In the meantime, we will be happy to discuss the impact of his proposals on you and your finances.

Significant points
  • Manifesto pledge to raise Personal Allowance to £12,500 and higher rate threshold to £50,000 fulfilled a year early, in 2019/20.
  • Off payroll working reforms to be extended to private sector engagers from April 2020.
  • No changes to pension relief apart from inflation uplift to Lifetime Allowance.
  • Tightening of CGT rules on Entrepreneurs’ Relief and Main Residence Exemption.
  • Annual Investment Allowance for plant and machinery increased to £1 million for two years from 1 January 2019.
  • New capital allowance for construction of commercial buildings introduced for expenditure from 29 October 2018.
  • First-time buyers’ relief from Stamp Duty Land Tax extended to shared ownership schemes.


March 2018 Fuel Rates

HMRC have announced new fuel rates, which will apply for all journeys from 1st March 2018, until further notice. For the one month of March, either the old rates or the new rates can be applied to business journeys. Hybrid cars are treated as either petrol or diesel for this purpose. These amounts can also be used for VAT purposes but employers will need to keep receipts.

The rates are :

Petrol     :     1,400cc or less 11p ; 1,401cc to 2,000cc 14p ; over 2,000cc 22p.

Diesel    :      1,600cc or less  9p ; 1,601cc to 2,000cc 11p ; over 2,000cc 13p.

LPG       :      1,400cc or less  7p ;  1,401cc to 2,000cc  8p ; over 2,000cc 13p 


Directors Tax Returns

HMRC say that it is necessary for a company director to file a self assessment tax return. The guidance issued by HMRC says that a company director should submit a tax return each year without prompt from them. They may impose a penalty for a late tax return.

Following a recent tax case ( M Kadhem TC5929 ) this guidance is not correct. The judge in the Tribunal case said that the guidance issued by HMRC which stated ” as a director of a limited company you must……register for self assessment……and send a personal self assessment tax return “, did not have the force of law and a taxpayer was not obliged to follow it.

Consequently, where there is no tax liability arising, an appeal should be submitted against any late penalty notices issued by HMRC for a late tax return, simply because you were a company director.