Spring 2020 Budget Update

The big news has been the changes to the Tapered Annual Allowance and the reduction in Entrepreneurs Relief. Below is our summary of the points that most effect our clients.

Pensions

Annual allowance

The annual allowance remains at £40,000 for 2020/21.

Tapered annual allowance

Threshold income is increasing from £110,000 to £200,000 and adjusted income from £150,000 to £240,000 for 2020/21. 

The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000. This means that all those with adjusted income of £312,000 or over will have an annual allowance of £4,000.

Lifetime allowance

The lifetime allowance for pensions will increase from £1,055,000 to £1,073,100 for 2020/21.

Money purchase annual allowance

The money purchase annual allowance remains at £4,000 for 2020/21. This is the amount you can put in once you have flexibly accessed income from your pension.

Tax

Entrepreneurs Relief

Entrepreneurs who sell their business could face an increase to the amount of Capital Gains Tax (CGT) they may have to pay. Entrepreneurs relief means that CGT is payable at 10% on gains up to a lifetime limit. This limit is reducing from £10,000,000 to £1,000,000 with immediate effect. (11/03/2020)

Any capital gains on the sale of businesses which exceed the limit will be taxed at 20% for higher and additional rate taxpayers.

Capital Gains Tax

The annual capital gains tax allowance will increase to £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, for disposals in the 2020/21 tax year.

Income Tax

The personal allowance (the amount you earn before you have to start paying income tax) will remain at £12,500. For non-Scottish tax-payers, the amount people will have to earn before they pay tax at 40% will remain at £50,000. Full details can be found here.

Inheritance tax

As expected, the Inheritance Tax (IHT) nil rate band will remain frozen at £325,000 until April 2021.

The residence nil rate band will increase from £150,000 to £175,000 from April 2020, delivering on the Government’s commitment to allow some couples to leave an IHT-free inheritance of up to £1,000,000 to future generations. (£325,000 + £175,000 each)

ISAs

ISA

The adult ISA annual subscription limit for 2020/21 will remain unchanged at £20,000.

Junior ISA

The junior ISA annual subscription limit for 2020/21 will be uprated from £4,368 to £9,000. 

Lifetime ISA

The lifetime allowance ISA limit will remain unchanged at £4,000.