Budget 2020 – Andrew Moorby’s tax predictions

Andrew Moorby, our Managing Partner, gives his view on the tax changes we are likely to see in the Budget on March 11th 2020.

The new Government has a large majority and therefore the Chancellor can be bold in the measures he introduces.

As with all Budgets, the tax measures will try and accomplish a number of aims, including to raise finance to cover the large spending commitments made during the election, encourage investment, construction and research but will also include targeted measures to encourage or discourage certain behaviours.

Potential changes

From the rumours we have heard, and reading between the lines of various comments made, the measures that might appear could include:

  • Measures to tackle ongoing issues of tax evasion. These will inevitably be targeted at known abuses and schemes.
  • An increase in the NIC threshold
  • Restricting pensions tax relief to 20%. This is seen as a possible method to raise money to fund increased social care. Council Taxes are also expected to rise to help fund this.
  • Reforming Inheritance Tax to make it fit for the 21st century and to simplify it. The rumours indicate that there will be winners and losers. The basic exemption (nil rate band) could be increased but the exemptions for certain gifts and non-chargeable assets may become more restrictive.

Research and Development

Whilst people think of tax as a finance raising initiative, taxation is also used to influence behaviour. Various ministers have hinted at changes to such incentives but there is little detail available.

The Government is keen to promote and incentivise research and development, but we are increasing seeing some advisors abuse the rules and push claims beyond “normal” levels. From experience, this not only exposes the client involved but also puts the whole incentive scheme at risk. I would therefore not be surprised if the R&D tax relief rules were tightened.

Entrepreneurs’ Relief

The most commented on reform to tax incentives is a restriction to Entrepreneurs’ Relief, which provides a 10% capital gains tax rate to people selling the trading businesses. Possible changes could include a restriction to the total value of gains qualifying for relief, an increase in the rate above 10%, or more subtle changes such as increasing the qualifying shareholding threshold, the qualifying holding period or the physical involvement with the business (i.e. a working time requirement).

Business investment incentives

Over recent years there has been a stagnation of investment and a decline in productivity. We would therefore expect to see more incentives to encourage businesses to invest. The Annual Investment Allowance has already been increased to £1m and I would expect to see this remain in place.

In addition, there will be targeted efforts including special incentives around the proposed free ports and enhanced relief for carbon cutting initiatives.

Housing

New house building will continue to be encouraged. At present Stamp Duty Land Tax can put people off property purchases and so a reduction at the lower end of the tax is likely. There will also be incentives introduced to help first time buyers afford homes in their local area.

Budget 2020 – keep up to date with the changes

You can visit our Budget 2020 page to keep up to date with the changes, including blogs and guides from us highlighting the key areas.