AUTUMN BUDGET PREDICTIONS 2020

As yet, we don’t know exactly when the Autumn Budget will be as the Treasury hasn’t set a date.

After borrowing and spending billions on the COVID-19 response so far, the Chancellor is reportedly considering different ways he could earn back funds for the Treasury.

We won’t know until Budget day which of the suggestions will be implemented, and also, whether they will be effective immediately or from the start of the next tax year in April 2021, so we need to be prepared. If you think you might be affected, please contact us.

Some of the reported suggestions that we need to be aware of for planning purposes are as follows:

• National insurance rise on self-employed profits

There is a possibility that Class 4 National Insurance paid by the self-employed could be increased from 9% to 12%. This would bring self-employed National Insurance contributions in line with those paid by employees.

• Pension tax break reduced

Tax relief on pensions contributions could be reduced to a flat rate for all taxpayers.

Currently anyone saving into a pension gets this relief at their income tax rate – 20% or 40% for higher earners, so a change like this could have a dramatic effect for higher rate taxpayers.

• Capital gains tax rise

Capital gains tax (CGT) rates could be set at the same levels as those for income tax.

This would affect second homeowners and small business people when they sell their company. CGT is currently charged on gains over £12,300 at 10 per cent for basic-rate taxpayers and 20 per cent for higher and additional rate taxpayers, or 18 per cent and 28 per cent respectively where the gains relate to residential property.

Income tax rates are higher than CGT rates at 20% and 40% so could have  major impact on the tax paid on a gain such as this.

• Inheritance tax overhaul

There is a possibility that the Government might overhaul the current IHT system, although there is currently no speculation of what this could look like. IHT is a tax paid when passing on estates worth over a certain amount.

• Online sales tax

An online sales tax could be introduced to help the high street. Bricks and mortar shops on the high street pay business rates but there is not an equivalent tax for online-only stores.

• Corporation tax rise

A corporation tax rise could also be announced in the budget. This is the tax that limited companies pay and is currently set at 19%, but could rise to a potential 24%.