The new chancellor has just sat down after delivering his first budget statement. The issue of the government’s response to coronavirus dominated the first part of his speech.
Of more interest to us and our clients were the measures that directly affect personal finances.
Our summary of the key issues:
- Increasing National Insurance thresholds – from April 2020 the threshold at which employees and self-employed start paying National Insurance Contributions (NICs) increases to £9,500.
- Tapered annual allowance for pensions – The pensions annual allowance is the maximum amount if tax-relieved pension savings that can be accrued in a year. For those on the highest incomes, the annual allowance tapers down from £40,000. From April 2020 the two tapered thresholds will each be raised by £90,000. This means that the “threshold income” will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance and the annual allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000. For those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.
- Lifetime allowance for pensions – The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax efficient manner over their lifetime will increase to £1,073,100.
- Starting rate for savings tax band – the band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000.
- Individual Savings Account (ISA) annual subscription limit – The adult ISA annual subscription limit for 2020-21 will remain unchanged at £20,000
- Junior ISA and Child Trust Fund annual subscription limit – The annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.
- Capital Gains Tax: Reduction in the Entrepreneurs’ Relief lifetime limit – From today (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.
Finally the good news for some of our clients is the duty for beer, cider wine and spirits will remain frozen in 2020-21!