Personal tax allowances and NICs
The personal tax allowance will remain at £12,500 for 2020/21.
The Class 1 National Insurance Contributions (NIC) primary threshold will rise to £9,500 from April 2020 (from £8,632 in 2019/20, which means an average increase in earnings of £104 for employees.
The Budget also contained details of a future consultation on pension tax administration. Those earning around or below the level of the personal allowance and saving into a pension may benefit from a top-up on their pension savings equivalent to the basic rate of tax, even if they pay no tax. Whether they receive this top-up will depend on how their pension scheme administers tax relief.
Implementation of recommendations from the independent review of the loan charge
The government has confirmed that it will implement all but one of the recommendations made by Sir Amyas Morse in his review of the loan charge rules. The legislation will have effect retrospectively to 5 April 2019, which is the relevant date for the purposes of applying the loan charge. However, clauses related to repayments of voluntary payments will have effect on and after the date of Royal Assent to Finance Bill 2020.
Income tax and NI exemptions for bursary payments to care leavers
Statutory income tax and NIC exemptions will apply for the one-off £1,000 bursary paid to care leavers aged between 16 and 24 who enter an apprenticeship.
The measure will have effect after the date of Royal Assent to Finance Bill 2020, once regulations have been laid to specify the details of the bursary payment. For payments that have already been made HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any retrospective amounts.
2020/21 Van benefit and car and van fuel benefits confirmed
The van benefit charge and the car and van fuel benefit charges will rise in line with the Consumer Price Index (CPI) from 6 April 2020. The flat-rate van benefit charge will increase to £3,490, the multiplier for the car fuel benefit multiplier will increase to £24,500, and the flat-rate van fuel benefit charge will increase to £666.
Taxation of company cars using CO2 emissions
As announced at autumn Budget 2017, the carbon dioxide (CO2) emissions figure for the purposes of the company car tax regime and related charges will be based on the Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020.
For cars measured under WLTP, most appropriate percentages are reduced by 2 percentage points in 2020/21 compared to the current percentages for cars with emissions measured under the New European Driving Cycle (NEDC) to help support the introduction of the WLTP for example, emissions generating a percentage of 8% would have a reduced percentage of 6%. The percentages will then be increased by one percentage point for each of the tax years 2021/22 (for example from 6% to 7%) and 2022/23 (for example from 7% to 8%). In the tax year 2022/23, the increase will bring the percentages back to their published rates in existing legislation.
The measure includes changes to the appropriate percentage figures for all cars classified as being ZEVs under both the NEDC and WLTP test procedures. The appropriate percentage will be reduced to 0% for 2020/21 and will be increased by one percentage point for 2021/22 (to 1%) and 2022/23 (to 2%). In 2022/23, the increase will bring the appropriate percentage back to their published rates in existing legislation which will be sustained throughout the tax years 2023/24 and 2024/25.
For cars registered between 1 October 1999 and 5 April 2020 inclusive, the CO2 emissions figures for company car tax and related charges will continue to be based under the New European Driving Cycle (NEDC) procedure.
Pensions tax changes to income thresholds for calculating the tapered annual allowance
Following an increase in the threshold income and adjusted income, those individuals with a threshold income of between £110,000 and £200,000 and adjusted income between £150,000 and £240,000 will no longer be impacted by the tapered annual allowance.
Broadly, the income limits used in calculating a tapered annual allowance is increased and the minimum tapered annual allowance reduced. The threshold income, which is broadly net income before tax (excluding pension contributions), will rise from £110,000 to £200,000. The adjusted income, which is broadly net income plus pension accrual, will also rise from £150,000 to £240,000.
For individuals who continue to be affected by the tapered annual allowance, the minimum tapered annual allowance will be £4,000 (currently £10,000).
These changes have effect for 2020/21 and will be effective for benefits accrued on or after 6 April 2020.
Tax treatment of the Troubles Permanent Disablement Payment Scheme
An exemption from income tax, inheritance tax and capital gains tax applies for payments made under the Troubles Permanent Disablement Payment Scheme from 29 May 2020.
CGT entrepreneurs’ relief – reduction in the lifetime limit
The lifetime limit for capital gains tax (CGT) entrepreneurs’ relief is reduced from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.
There are special provisions for disposals entered into before 11 March 2020 that have not been completed.
HMRC have also published a technical note explaining the reduction. View the technical note Reduction in the lifetime limit for Entrepreneurs’ Relief – technical note.
Capital gains tax: annual exempt amount
The capital gains tax (CGT) annual exempt amount for 2020/21 will rise from £12,000 to £12,300 for individuals and personal representatives, and from £6,000 to £6,150 for trustees of settlements.
Changes to top slicing relief on life insurance policy gains
An amendment to the legislation will allow the personal allowance to be reinstated within the calculation for top slicing relief (TSR). This will provide additional relief for taxpayers whose entitlement to the personal allowance has been reduced because a gain is included as part of their income. The measure will have effect for all relevant gains occurring on or after announcement at Budget 2020.