On Wednesday the 11th March 2020, the newly appointed chancellor Rishi Sunak will deliver his first budget to the country, the first in over eighteen months. We detail what we expect to change below, though following warnings of the potential cost to the economy of the Coronavirus outbreak, there are reports it will focus on protecting the country and prioritise economic security.
In light of Tuesday’s press conference and the worst-case scenario, a significant portion of the budget is expected to focus on plans for the outbreak. Plans to delay non-urgent operations, re-hire recently retired doctors and nurses and even close schools and cancel public gatherings are expected to be explained and funded.
Rise of the National Insurance threshold
One of the key conservative pledges was to increase the threshold for National Insurance which should result in a significant number of workers earning more, before it starts being charged. It has previously been announced that it will rise to £9,500 for employees and £8,788 for businesses from the 6th April 2020. The intention is that within a number of years it will align with the Personal Allowance, currently £12,500.
IR35 confirmation and clarification
Following the introduction of the Public sector off-payroll working rules in 2017, the government has confirmed it will push ahead and introduce them to the private sector. Though widely opposed by contractors, businesses, accountants and some MPs, the new rules will move the liability and decision for working ‘inside’ or ‘outside’ of IR35 away from the contractor, and on to the end client or hiring agency. Further details on how it will operate and what to expect will be announced. If you are a contractor, please let us know if your agency or end client have provided a decision, as you may need to change the way you work. You can read more here
Social care funding
Another key pledge of an extra £1 billion will ensure that the social care system provides everyone with the dignity and security they deserve and that no one needs to sell their own home to pay for care. Funding is expected to come from council tax rises and hidden tax rises.
Fuel duty increase, red diesel and electric vehicles
Following increasing environmental concerns and future carbon emission goals, the freeze on Fuel Duty is expected to end. A decade since its introduction, it is estimated to cost the taxpayer around £9 billion per year. Reliefs to Red Diesel are expected to be scrapped, along with further details of electrical vehicles, reliefs and schemes.
Proposals to cut inheritance tax to 10% (from 40%) and scrap the charge on gifts from family members within seven years are being considered.
Recent announcements in the press have hinted towards the Entrepreneurs Relief being cut back or eventually scrapped. Though nothing has been confirmed and we are a month from the new tax year, it was part of the election policy to ‘review’ it.
Pension tax relief and tracking
Plans by Sajid Javid to cut the relief from 40% to 20% for those earning more than £50,000 per year would have netted approximately £10 billion per year. Since taking the role of chancellor, Rishi Sunak has cancelled these plans, though changes are expected. A previously promised dashboard to help payers track their retirement savings is expected to be confirmed.
Originally part of Sajid Javid’s plan to introduce a “wealth tax” for those that own expensive homes, the “mansion tax” has been ruled out by Boris Johnson, following Sajid Javid’s departure.
Other possible changes
Once the budget has been announced, we’ll provide a further update with what has been confirmed, so stay tuned!