March 2020 Budget Highlights
Neil Jenkins
No-Nonsense Pension, Investment, Tax and Estate Planning Advice | Founding Partner of Fintegrity IFA
Pensions
Annual Allowance
Pension contribution limits for people earning more than ￡150,000 have been relaxed. Broadly speaking, from 6th April 2020, if your income is less than ￡240,000, you can now pay up to ￡40,000 per year into your pension. The maximum amount you can pay gradually reduces by ￡1 for every ￡2 over this limit to ￡10,000 (the current minimum) if you earn ￡300,000. The budget introduces a new minimum of ￡4,000, so the Annual Allowance will continue to reduce for those with an income of ￡312,000.
Low Earners
Some low earners who are members of their workplace pension scheme and pay their contributions by salary sacrifice currently miss out on tax relief on their contributions. The budget aims to address this inequality. The Chancellor plans to introduce a new scheme to provide relief at source, so that low earners don’t miss out.
Income Tax Rates and Allowances
Bands and Rates
No changes to income tax rates. The personal allowance remains at ￡12,500, and the higher rate threshold remains at ￡50,000.
National Insurance (NI)
The primary threshold, the income at which employees and the self-employed begin to pay NI will increase from ￡8,632 pa to ￡9,500 pa.
Capital Gains Tax
No changes to rates. The individual annual Capital Gains Tax exemption increases from ￡12,000 to ￡12,300.
Inheritance Tax
The Nil Rate Band remains ￡325,000. The Residential Nil Rate Band increases to ￡175,000 as previously announced, and the Inheritance Tax Rate remains unchanged at 40%.
Entrepreneurs Relief
Entrepreneurs who sell their business pay Capital Gains Tax at a reduced 10% rate. The upper limit on capital gains prior to the budget had been fixed at ￡10 million, but this will reduce to ￡1 million. Higher rate tax-payers will now pay Capital Gains Tax on the excess over the new lifetime limit at the 20% rate.
IR35 To Go Ahead
This will now be included in the finance bill with no changes proposed. Large and medium sized companies will be responsible for deciding whether contractors working for them should be treated as employees and deduct PAYE/NICs.
Junior ISAs (JISAs)
The savings limit for ISAs remains unchanged at ￡20,000 pa, but the limit for JISAs is to increase to ￡9,000 pa.