- 9th March 2020
- Posted by: team-glow
- Category: Current Affairs
The 2020 Budget – Predictions and Potential Changes
Every year, the government reveals its plans on how to spend public money and collect tax for the next financial year beginning 5 April, and usually does so around the beginning of March. However, this year, rumours emerged that the resignation of Chancellor Sajld Javid may cause a slight delay to the ‘big reveal’.
The recently appointed replacement Chancellor of the Exchequer, Rishi Sunak has however advised he WILL meet the deadline set by former Chancellor SajId Javid and reveal the government’s new budget on Wednesday 11 March. Not only is this Chancellor Sunak’s first budget since his appointment, it is also the first major financial event since Britain left the EU on 31 January, so it is predicted that we will see some major changes.
In order to help your businesses prepare for the potential changes, we have outlined specific issues that industry experts predict will be acknowledged in the new budget.
Increases to the National Minimum Wage
Every year the National Living Wage and the National Minimum Wage changes in April.
In December 2019, the government announced that it was planning to increase the National Living Wage for over 25’s by 6.2%, which could mean a pay rise of almost £1000 for some workers.
The government has recently confirmed that it is also planning to increase the National Minimum Wage, which since April 2019 stands at:
- Apprentice – £3.90
- Under 18 – £4.35
- 18-20 – £6.15
- 21-24 – £7.70
From April 2020, the National Minimum Wage per hour will increase:
- Apprentice – £4.15
- Under 18 – £4.55
- 18-20 – £6.45
- 21-24 £8.20
Raising the threshold on NICs (National Insurance Contributions)
One of the conservative’s main financial pledges in its election manifesto was to cut tax which could help 30 million workers save about £100 a year.
The government has planned to achieve this by raising the threshold on NICs (National Insurance Contributions) meaning that businesses will need to adjust this accordingly for employee payroll.
Currently, employees pay 12% NICs on anything they earn over a threshold of £8,632. At the start of the next tax year in April, this threshold will increase to £9,500 with the intention of raising it to £12,500 over a number of years.
Possible changes to Entrepreneurs’ Relief
Former Chancellor Sajid Javid was expected to recalibrate entrepreneurs’ relief after proposing to cut the tax amidst criticism. Entrepreneurs’ relief is a tax break that allows company owners to pay less capital gains tax when selling their businesses.
It is now uncertain whether Chancellor Sunak will continue with these proposed plans, but they should be acknowledged in the budget.
Triple tax lock and corporation tax to stay the same
It is unlikely that the government will increase rates on income tax, VAT and national insurance, as promised by Prime Minister Boris Johnson in his election campaign.
It has also cancelled plans to decrease corporation tax to 17% meaning that it will remain at 19% for at least the next financial year.
More details about off-payroll working rules for the private sector
The government has already announced that tax legislation, known as IR35, will be applied to the private sector as a way of tightening the rules around off-payroll workers and preventing tax avoidance.
Although the government has already announced this policy, it is most likely that this will be confirmed in the budget in greater detail. This means that businesses can be more confident about making decisions when it comes to employment status and paying off-payroll workers.
Pension Tax Relief changes for higher earners
The Financial Times has reported that reforms to pension tax relief are also being considered and so could feature in the budget.
The reforms would affect higher earners who pay a higher rate of tax and receive a tax relief rate of 40%. The potential new plan would see a flat pension tax relief rate of 20%, which would affect higher earners’ pensions.
A new timeline for the pensions dashboard
The pensions dashboard project was announced in the 2016 Budget. It was intended to be an easy-to-use digital interface that would allow users to see all of their lifetime pensions in one place.
The government had originally pledged to deliver this project in 2019 but considering that the deadline has passed it is expected that the new chancellor will announce a new timeline for the project. According to pensions commentator Steve Webb, as reported in The Financial Times, it is unlikely that this project will go live in 2020.
Our specialist team is always at the other end of the phone if you are ever unsure or need some reassurance from an approachable accounting partner.
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