Budget 2020: Predictions

Budget 2020: Predictions

Budget 2020: Predictions

Rishi Sunak will deliver the 2020 Budget on Wednesday 11 March.  But what can we expect when the Chancellor opens his red box?

Craig Walker, a tax specialist at Hawsons, gazes into his crystal ball:

With a substantial majority, the government have an opportunity to be radical and adventurous in this Budget, and we could see some major tax changes announced.  We can expect the fruition of some of the Conservative manifesto pledges and an undertaking to “level up” and “unleash the country’s potential” post Brexit. The Chancellor is under pressure to increase spending on the NHS, social care and schools, but the manifesto said the government would not put up income tax, national insurance or VAT. He must therefore either find other ways to raise taxes or abandon the government’s targets on borrowing.

Personal Tax

Income Tax

The Conservative party pledged during the election process not to raise income tax or national insurance rates (in England and Northern Ireland), so no changes are expected.

The tax-free personal allowance is set to remain at £12,500 for the 2020/21 tax year.

The prime minister previously pledged to raise the threshold at which people pay higher rate (40%) tax from £50,000 to £80,000 but this proposal appears to have been dropped completely.

A cut to National Insurance (NIC)

As promised in the manifesto, the threshold below which no NIC is payable (the primary threshold) is expected to raise from £8,632 to (at least) £9,500 in April.  This will provide an annual saving of £104 for workers.  The prime minister has set an NIC threshold of £12,500 as his “ultimate ambition”.

A raid on tax relief for pension contributions?

We could see some changes to the pensions tax relief regime to reduce the cost to the Treasury, with tax relief on pension contributions estimated to cost the Treasury around £40bn per year.  Although unpopular with high earners, it would not be surprising to see tax relief for pension contributions restricted to a flat rate such as the 20% basic rate of income tax (rather than the individual’s marginal rate of tax).  As part of these reforms we could see the removal of the controversial annual allowance charge.  However, ahead of the previous Budget there were similar rumours of a pension overhaul and the reform never actually materialised, so we could see no significant changes to pensions relief.

Business Tax

The abolishment of Entrepreneurs’ Relief?

The Conservative party pledged to “review and reform” Entrepreneurs’ Relief in their election manifesto and further details are expected to be announced in the forthcoming Budget.  It seems unlikely that that the relief will be abolished altogether but changes are expected.  Further information on the possible changes can be found here.

Please note: It is important to seek advice on the availability of Entrepreneurs’ Relief well in advance of a sale to ensure that the relevant requirements will be met.

Promote innovation

The Chancellor is expected to increase the amount of tax relief provided to companies undertaking R&D, by increasing the R&D tax credit rate for large companies from 12% to 13%.  We could also see the Chancellor widen the definition of R&D to support investments in cloud computing and data.

Changes to VAT?

Currently businesses only have to charge VAT if their taxable turnover exceeds £85,000 a year and the government has pledged to keep the VAT threshold at £85,000 for the next 2 years.

An increase to the rate of VAT has been ruled out and there is some speculation that the Chancellor may even be considering reducing the rate of VAT.

Tax relief for building new business premises

The rate of the Structures and Buildings Allowance will be increased from 2% to 3% to encourage businesses to build new premises.

 

Corporation Tax

Rate cut scrapped

As previously announced, the planned cuts to corporation tax in April, from 19% to 17%, will be put on hold. However, the Chancellor will be keen to send a strong signal that the UK remains a good place to do business following Brexit.

 Digital Services Tax

The government have pledged to implement the Digital Services Tax, despite opposition from the US. This is a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The new tax is set to be introduced in April 2020.

 Northern Ireland

The rate setting power for corporation tax in Northern Ireland will be devolved to the NI Assembly. So we could see a reduction in the corporation tax rate in Northern Ireland.

Non-UK resident companies

From 6 April 2020, non-UK resident companies that carry on a UK property rental business or have other UK property income will be liable to corporation tax instead of income tax and will have new reporting requirements.

Capital Gains Tax (CGT) & Stamp Duty Land Tax (SDLT)

CGT rates to rise?

Although the government ruled out increases to income tax, VAT and NIC, this did not extend to taxes such as capital gains tax and the Chancellor could choose to increase the rate of tax charged on the disposal of assets, such as shares or property, in order to increase Treasury receipts.

 Report and pay CGT on property sales within 30 days

From 6 April 2020, capital gains tax due on the disposal of residential properties will need to be reported and paid within 30 days of the completion date. This is the latest acceleration of tax payment dates for CGT and follows changes introduced for non-UK resident disposals in April 2019.

Private Residence Relief

From 6 April 2020, Private Residence Relief which allows an additional grace period of the last 18 months of ownership will be halved to nine months.

Lettings Relief

Lettings Relief is a valuable CGT relief which gives up to £40,000 of additional relief where a property which was previously a main residence is then let out.  The government has announced that the relief will be reformed so that from 6 April 2020 it will only apply where an owner is in shared occupancy with a tenant. This is relatively unlikely so this change may increase the amount of tax payable on the sale of a dwelling by up to £11,200, or £22,400 for a couple.

First time buyers

In an attempt to boost the housing market, the Chancellor may be considering providing further assistance for first time buyers, perhaps through cuts to the rates of Stamp Duty Land Tax (SDLT).

Additional SDLT for non-UK residents

A 3% Stamp Duty Land Tax (SDLT) surcharge for non-residents buying UK residential property is expected to be introduced, to be paid in addition to all other SDLT surcharges.

 

Employment Tax

Off-Payroll Workers

The off-payroll working rules have been in place since 2000 and are relevant to those working through personal service companies. In 2017 the government reformed the operation of the rules for the public sector and is set to extend this to all medium and large organisations from April 2020. This will shift responsibility for operating the IR35 rules to the organisation that engages the worker.

Further details and guidance on how to prepare for the changes can be found here.

Minimum wage rates to rise

The minimum wage rates are set to rise substantially in April. Details of the new rates can be found here.

Inheritance Tax

Reform imminent?

Last year the Office of Tax Simplification undertook a review of Inheritance Tax (IHT) and urged substantial changes to be made. A group of cross-party MPs have recently echoed these comments and recommended a radical overhaul of the IHT system, including a substantial cut in the 40% rate to 10% and the scrapping of most reliefs including the “seven-year rule”.

We could see announcements in the Budget aimed at simplifying the system and reforming the various IHT reliefs and exemptions.

Anti-Avoidance

Closing tax loopholes

We can expect the government to introduce new anti-tax avoidance and evasion law to help reduce the UK tax gap. This has been a recurring theme in recent Budgets.

Other

Fuel duty

Fuel duty has been kept at its current level since the Conservatives took power and during the election the Prime Minister said he had “absolutely no intention” of ending the fuel duty freeze.  However, the government has suggested that a green agenda is one of its priorities and we could see a fuel duty rise for the first time in a decade.

Tax simplification

There is a widespread acceptance that the UK’s tax rules are overly complex and continue to become even more so.  Businesses would welcome simplification of the rules and the Budget provides the Chancellor with an opportunity to take action in this area.  Perhaps we could see a closer alignment of income tax and NIC rules.

 

This article comes with the usual disclaimer regarding all rumours and predictions: they should not be considered fact until they have been uttered by Mr Sunak himself.

Our tax specialists will be watching the Budget on 11 March and will provide commentary on the announcements.  To pick up on our commentary, follow us on Twitter (@Hawsons) or LinkedIn.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker

Tax Director, Sheffield

0114 266 7141
Legal Services and the future of the UK Economy

Legal Services and the future of the UK Economy

Legal Services and the future of the UK Economy

The Law Society has recently pushed for Brexit negotiators to make legal services one of their priorities in upcoming trade discussions. This is after a recent report demonstrated that legal services put more money into the UK economy than first estimated.

A recent report produced by KPMG shows that in 2018 legal services provided £60bn into the UK economy, this compared to £25bn in 2016.

In 2017 statistics showed that legal service exports reached £5bn and contributed £4.3bn to the UK’s balance of trade. The productivity of the legal service market rose by 17% over the 5-year period 2013 to 2018, despite employment levels decreasing by 0.7% over the same period of time. The Gross Value Added (GVA) contribution per employee increased to £100,500. The increase in productivity is mainly down to changes in methodology as technology has developed and allowed the sector to automate processes which is increasing efficiency.

Law Society president Simon Davis said: ‘This report shows the value of our sector to UK plc – that is why we think it is vital our trade negotiators put legal and other professional services at the heart of forthcoming talks on a new deal with Europe. It is crucial the government seeks to maintain access to the EU27 for our legal professionals as well as recognition of their qualifications once the post-Brexit transition period finishes at the end of 2020.’

How we can help

At Hawsons we have a dedicated team of legal accountants at our offices in Sheffield, Doncaster, and Northampton. We act for a large number of law firms across all three of our offices and offer a wide range of services which are tailored to meet their individual needs. Our legal client base consists of a multitude of firms of varying structure and size, from sole traders to limited companies and LLPs with corporate members.

If you would like to book your first free initial meeting with us click here.

If you would like to find out more about Hawsons visit our website here.

More from our legal sector experts

You can find all of our latest legal sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141
First-time buyers do not take advantage of house price fall

First-time buyers do not take advantage of house price fall

First – time buyers fail to take advantage of house price slowdown

The current property market has been very weak over the last year. But it appears that first-time buyers have been unable to take advantage of this, with house prices increasing more for them than other purchasers.

According to Halifax the average cost of a home for a first-time buyer in 2019 has increased by 9% to £231,455 which is an increase of £18,252 compared with 2018. The overall average growth of house prices in 2019 was 1.4% which shows that the price for first-time buyers outstrips everybody else by a high margin.

Factors that may have contributed to this sharp increase

Firstly, there is a trend for first-time buyers to save slightly longer and buy a larger family home instead of buying a small flat which means they will need to move again in three- or four-years’ time.

Secondly, there is the Government scheme called the Help to Buy ISA. In this ISA you can deposit £1,200 into it and save £200 per month after that. You can save a maximum of £12,000 into you ISA and when you want purchase your first home the Government will give you a 25% bonus, this will be an additional £3,000 if you save the maximum of £12,000. Furthermore, less expensive mortgages may have encouraged some first-time buyers to borrow more in order to purchase a better property.

Russell Galley from Halifax said: “While price growth in the overall housing market has been modest in recent years, the level of inflation facing first-time buyers is greater, which compounds the challenge in raising bigger deposits. However, given their importance to the market as a whole, it’s reassuring that the overall number of new buyers getting on the ladder remains stable.”

How can we help

At Hawsons we have dedicated team of specialist property accountants at our offices in Sheffield, Doncaster, and Northampton.

Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

If you would like to book your first free initial meeting with us click here.

If you would like to find out more about Hawsons visit our website here.

More from our property experts

You can find all of our latest property and construction sector news here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

0114 266 7141
Benefits of using Cloud Accounting

Benefits of using Cloud Accounting

Benefits of using Cloud Accounting

A large number of small businesses (46%) understand that using technology such as cloud accounting can boost their productivity and 50% said it would improve staff efficiency and 43% said it would help up-skill staff. Yet only 45% of SMEs in the UK have recently invested in technology and 75% don’t have any plans to invest in up-to-date technology.

Cloud accounting is one of the ways in which many SMEs can improve productivity. The various online accounting platforms can help you manage all of your company accounts including invoicing, payments, expenses and payroll. Cloud accounting is now even more important with VAT returns now being filed online under the government’s new Making Tax Digital (MTD) requirements.

There are many online platforms to choose from including Quickbooks, Sage, Xero, etc. All these platforms have an array of tools which can help you manage your finances effectively. Popular platform Quickbooks say that using a cloud accounting tool can help businesses as they will be able to see their cash flow in real time. This will allow more free time for you to do more proactive activities like building your business.

Director of digital marketing agency, Matthew Porter has said: “Our agency has utilised a cloud-based accounts platform since our incorporation, initially to purely manage invoicing. As the company grew, our entire accounts have migrated to the solution to reduce the amount of time wasted on manual processes such as tracking payments and storing physical copies of incoming and outgoing receipts. Our automated invoicing feeds in to a payment capture system and bank account integration, that in turn utilises AI or machine learning to aid in consolidating them. This has made the largest gains in time reduction, removing multiple manual processes.”

Although Matthew Porter is not a client of Hawsons, we have many of our own clients who share similar stories.

How can we help

At Hawsons we have a dedicated team of cloud accounting specialists at our offices in Sheffield, Doncaster, and Northampton. Our specialists can provide training on your cloud accounting software so you know how to use it efficiently and get the benefits as quickly as possible.

If you would like to book your first free initial meeting with us click here.

If you would like to find out more about Hawsons visit our website here.

Free initial meeting

Scott Sanderson

Partner, Sheffield

0114 266 7141
2019 has been the worst year for retail in 25 years

2019 has been the worst year for retail in 25 years

For the first time in 25 years retail sales dropped in 2019 according to the leading UK retail industry body, total sales decreased by 0.1% compared to 2018. Sales during the Christmas period were particularly weak falling 0.9% in November and December (data from the British Retail Consortium).

Whilst a report made by Barclaycard discovered an increase in consumer confidence, this failed to increase consumer spending. Barclays who process almost 50% of UK debit and credit card transactions said that if you take inflation into account then consumer spending has decreased.

Retail sales decrease in December

The so-called golden quarter for retail was very poor showing that even December can be a tough time for retailers with sales volume decreasing by 0.6% from November to December. This is the fifth consecutive month without growth (according to the Office for National Statistics).

There are currently very difficult trading conditions for a number of large companies with Thomas Cook and Mothercare going bust last year. Even food stores were badly hit around the Christmas period with some large supermarkets already suggesting that people spent less this Christmas than in 2018.

Chief executive of the British Retail Consortium, Helen Dickson said: “Twice the UK faced the prospect of a no-deal Brexit, as well as political instability that concluded in a December general election – further weakening demand for the festive period.

“Retailers also faced challenges as consumers became both more cautious and more conscientious as they went about their Christmas shopping,” she added.

The BRC’s figures do not represent the entire retail sector as some huge online retailers such as Amazon were not included in the data. But Helen Dickson says that these figures are from the majority of retail sales, and insists they are accurate.

How can we help

At Hawsons we have a dedicated team of retail, wholesale, and e-commerce accountants at our offices in Sheffield, Doncaster, and Northampton.  Our specialist team offers a wide range of services which are tailored to meet your individual needs. Our understanding of the issues faced by the retail, wholesale and e-commerce sector means that we can proactively seek out ways for you to maximise your profitability and minimise your tax liabilities.

If you would like to book a free initial meeting with us click here.

If you would like to find out more information about our services visit our website here.

More from our retail experts

You can find all of our latest retail sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Pete Wilmer, Corporate Finance Partner

Pete Wilmer

Corporate Finance Partner

0114 266 7141