Breaking down the budget

 In Analysis, Information, Legislation, Tax, VAT

During the Great Depression, President Franklin D. Roosevelt stated in his Inauguration Speech in 1933, “the only thing you have to fear is fear itself”.

 

Fear
The official response to a problem tends to bring about a situation worse than the problem. For example, there was a foot and mouth disease outbreak 18 years ago.  Our clients in the transport and plant hire businesses found it next to impossible to do their jobs at that time due to the restrictions. However, I am pleased to confirm they are all still in business today.

I and the rest of my Team intend to be here to look after you as best as possible.  If you are concerned about the risks of going out to a Meeting due to the coronavirus, or if you are currently confined to your home, then there is no problem meeting me on the internet.  I do have a Skype ID.  I have also recently been introduced to “Zoom” by my client Mike Andrews of The Places People Limited who uses it a great deal. You can not only see each other using Zoom but you can also share documents on it.

I am deliberately giving Mike Andrews a special plug here because due to the lack of tourist traffic these days, his business has been quite badly affected.  In the event that you, or anyone that you know, are having difficulty with a house move that may fall through and might end up with nowhere to go, please get in touch with Mike.  He has a wide range of properties available, and he is also a thoroughly nice person to deal with.  If you do get in touch please mention my name.

If we all live as normally as possible, then in the end it will make life easier for everybody.  I was recently listening on the BBC to Dr Philip Hammond, who writes for Private Eye under the name MD, and he suggested that the best thing we can do at the moment, apart from getting our 5 a day portions of fruit and vegetable, is to also have 5 daily portions of fun.

What follows below is a digest of Tax and other changes following on from the Budget of 11th March 2020.

 

H M Revenue and Customs Administration
As a result of the changes announced by the Government and of the business situation in general, H M Revenue and Customs will now be rushed off their feet dealing with telephone calls and enquiries from people who are having difficulty paying their taxes.  The fact that an unknown number of H M Revenue and Customs staff may go down with the coronavirus, or self-isolate, is not going to help matters.  We may therefore expect even longer delays in answering questions by H M Revenue and Customs and in dealing with correspondence and request for information in general.

All H M Revenue and Customs functions which are dealt with purely by their computer system will carry on working as before.  All those that depend upon human intervention will most likely be delayed. Anything complex or out of the ordinary may take weeks or months of additional time by the Authorities to deal with.  Please bear this in mind if you are waiting to hear about anything from the Authorities.

 

Income Tax Rates
There are no charges to Income Tax Rates or Tax Bands in England.  There are a few changes in Scotland but we have no clients based in Scotland and therefore none of the changes will affect you.

 

Capital Gains Tax Rates
There are no significant changes to the rates of Capital Gains Tax, however please bear in mind that for Entrepreneurs Relief, the lifetime allowance is only £1m rather than £10m.

 

Inheritance Tax Rates
There are no changes to Inheritance Tax, in that all chargeable estates are taxed at 40% on over £325,000.  Please bear in mind that there are annual exemptions for small gifts, for gifts on marriage or civil partnership, and for “normal expenditure out of income”, which can be overlooked.  Please consult us if you have any questions.

 

National Insurance Rates
As from 6th April 2020 you can earn £9,500 per annum before paying National Insurance Contributions.  If you are self employed you can make profits of up to £9,500 before paying Class 4 National Insurance Contributions.  The rate of Class 2 National Insurance Contributions for the self employed is now £3.05 per week, and voluntary National Insurance Contributions £15.30 per week.  Employees pay National Insurance Contributions of 12% on earnings over £182 per week, and employers pay 13.8% on earnings of over £169 per week.  The amount of the Employment Allowance has risen to £4,000 per annum from £3,000.

 

Stamp Duty Land Tax
The first £125,000 is taxed at 0%, between £125,001 and £250,000 2%, from £250,001 to £925,000 5%, from £925,001 to £1.5m 10%, and over £1.5m 12%.  These rates apply to England and Northern Ireland.  Scotland and Wales have different rates. If you are planning to buy a property in Scotland or Wales please contact us for further details.  There are additional rates for second properties normally at 3%, and from 1st April 2021 there will be a 2% surcharge on residential properties acquired by non UK residents.

 

Corporation Tax
Corporation Tax remains at 19%.  Most small Companies can write off the full cost of additions to plant and machinery against their taxable profits, and up till 31st December 2020 the maximum allowances that you can claim is £1 million per annum.  From 1st January 2021 it goes down to £200,000 per annum.

The Government has continued to allow the full cost of electric cars to be subtracted from business profits.  Unfortunately, in the case of cars that use any petrol the motor allowance is very much less. We suggest you contact us for further advice on this.

 

VAT
VAT Rates remain the same as last year and the annual turnover limit for registration remains at £85,000.

 

Special rules regarding the current health situation
If you have a business with less than 250 employees, the cost of providing up to 14 days of Statutory Sick Pay per employee should be met by the Government in full.  Business properties whose rateable value is below £51,000 in England will pay no Business Rates.

There will be cash grants of £3,000 to certain small businesses delivered by local Authorities.  Unfortunately, at the time of writing there is no news as to the mechanism for applying for the grant or its delivery.  More news will follow as soon as possible.

The Government is also providing business interruptions loans for businesses affected by the Virus.

 

Other matters
The Government will not delay the changes to IR35 and it is therefore, in the case of people working through Personal Service Companies, up to the Organisation that pays them to decide whether the contract is equivalent to employment or not.

If you have your own Limited Company and are in any doubt at all about the terms and conditions of the contract being offered to you, may we suggest that you get in touch with us for the contract to be reviewed and for possible suggestions as to changes that may be beneficial.

There is now no VAT on digital publications.  Therefore, if you are producing books or magazines online there is now no VAT on them.

– By Stephen Handley, FCCA

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