The new Chancellor, Rishi Sunak, is due to announce his first Budget on 11 March – just four weeks after starting the role.
Rishi Sunak replaces Sajid Javid, who resigned after refusing to replace his personal advisers with equivalents from number 10.
Javid didn’t get the chance to deliver a Budget during his seven months in the position – so what should we expect from his successor’s upcoming Budget?
The government has already said the National Insurance threshold will rise to £9,500 in 2020-21. This will work out as a £78 tax cut for the self-employed, so expect Rishi Sunak to trumpet the rise during his Budget announcement.
The government says there will be an even bigger cut of £104 for employed people.
Weekly Class 2 NICs will be £3.05 and the small profits threshold will be £6,475. For Class 4 NICs, the lower profits limit will be £9,500.
With this tax cut, the government is working towards its pledge to make sure “the first £12,500 you earn is completely free of tax”.
A radical shake-up of pension tax relief has been rumoured since George Osborne was Chancellor – and Sajid Javid was thinking about resurrecting the reform.
The Financial Times says that under the plans, the government could cut pension tax relief from 40 to 20 per cent for those earning over £50,000.
Javid wanted to make the system fairer for those on lower incomes by targeting higher-rate taxpayers. But The Telegraph says that Mike Cherry, head of the Federation of Small Businesses (FSB), believes a radical overhaul could put the self-employed off saving: “The reliefs provided on both the employer and employee side as part of the current system provide important incentives to save. There may well be scope for improvements, but it’s absolutely critical that any changes are subject to extensive analysis, consultation with businesses and impact assessments".
And Claer Barrett, editor of FT Money, says: “Sunak risks sparking retirement panic if he taxes our pensions first”.
Which? also says we could hear more about how a ‘pensions dashboard’ should be implemented, giving savers an easy way to see how much they will have in retirement.
Entrepreneurs’ relief lets business owners pay just 10 per cent Capital Gains Tax when they sell the business.
While rumours suggested Sajid Javid wanted to scrap entrepreneurs’ relief completely, The Times reported he was wavering on those plans before his resignation.
He was considering reducing the lifetime relief limit from £10 million to £1 million. Will Rishi Sunak push on with this?
Nimesh Shah, a partner at leading accounting and tax advisory firm Blick Rothenberg, isn’t sure: “There has been a lot of speculation around entrepreneurs’ relief being changed or restricted in the forthcoming Budget – it’s possible that any such changes which were driven by Sajid Javid could now be shelved, and delayed in their introduction until a future Budget.”
The Conservative manifesto promised to simplify the tax system. With the government fresh from its victory, though, we shouldn’t expect a radical shake-up at the next Budget.
Former pensions minister, Steve Webb, told The Sun: "The new government will have had little time to draw up detailed plans to overhaul major areas of the tax system.
"With a Budget just a few weeks before the start of the new financial year on April 6, it seems particularly unlikely that we will see major changes to take effect for 2020/21."
The government has been facing repeated calls to delay the introduction of new off-payroll working rules in the private sector.
They’re due to be implemented in April, but HMRC has been tweaking the rules and the House of Lords has launched its own inquiry to look at the impact of the rule change.
The Telegraph reports that business groups are calling on the new chancellor to delay the roll out. Andy Chamberlain, deputy director of policy at IPSE, said: “At the centre of all this really is that the IR35 rules, when they apply and don’t apply, are so complex that no one understands them, even HMRC”.
While the Treasury has confirmed reform will be going ahead (with small changes), expect Rishi Sunak to discuss the government’s separate review in the Budget.
With time against you, it's important to keep preparing for the rule change if you think it will affect you, and get professional advice if you need more help.
The Times says a plan to give people better access to cash might be unveiled during the Budget. Take note of this if you own a shop, as it could replace the cashback scheme.
Where customers currently have to buy something to get cashback, they wouldn’t need to make a purchase under the new scheme. That means they’d be able to walk in and ask for cash using their debit card.
The Times speculates this would be positive for small business owners as it helps support the local area by increasing footfall. It also reduces the shop’s cash banking.
On 11 February, Boris Johnson made a statement to the House of Commons promising more details on transport and infrastructure improvements in the Budget.
He said that the government will be making “transformative investments” and “improvements from Cornwall, to the A1 north of Newcastle, from south Salisbury to south Ribble, from Cheadle to Chiverton, dual carriageways, roundabouts, bypasses, underpasses”.
You could also notice major changes to roadsides, with £10 million of funding for electric vehicle charging points already announced by the Transport Secretary, Grant Shapps. This potentially means up to 3,600 more charge points across the country – could this affect where you park your vehicle?
What are you expecting Rishi Sunak to announce in his first Budget as Chancellor? Let us know in the comments below.
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22 June 2020 • 9-minute read
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