BudgetMar 19 2020

Chancellor raises Jisa and commits to tackling tax evasion

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Chancellor raises Jisa and commits to tackling tax evasion

The newly appointed Chancellor Rishi Sunak doubled the Junior Isa (Jisa) Limit, more than double the amount it was previously; increasing to £9000 from £4368 per year for from April.

Jisas

Commentators largely welcomed the move but fell short of fully endorsing it. 

Andrew Dixon, head of wealth planning at Kleinwort Hambros, says: “More than doubling the amount that can be put into a Junior ISA or Child Trust Fund annually will be welcome for families looking to save for their child’s future.”

“If saving the full amount each year, this would amount to total subscriptions into a tax free savings account or investment portfolio, of £162,000 by the child’s 18th birthday.”

It would be wise for the government to raise awareness of the funds and the increased subscription limit.--Rachael Griffin

But he cautions: “Mr Sunak may have given a glimpse into a government that is not afraid to spend, however the stagnation of the UK economy and action taken by the Bank of England indicates there is still a long way to go before the announcements are felt.”

This point is also made by Rachael Griffin, tax and financial planning expert at Quilter.

She says: “Although this will be music to the ears of many Junior ISA holders who may be currently hitting their subscription limits, it may not be properly considered by many Child Trust Fund holders.

"Since they were scrapped in 2012, many parents will have forgotten that they even opened up an account and will not be aware of this generous increase in the subscription limit.”

She concludes: “It would be wise for the government to raise awareness of the funds and the increased subscription limit to ensure that parents are making the most of the tax-efficient savings on offer for their children.”

Tax evasion 

Mr Sunak also made a notable commitment to reduce tax evasion through announcing that HMRC will raise £4.4bn by 2024-2025 by further targeting those evading and avoiding tax. 

The government’s funding to clampdown on avoidance and evasion and raise £4.4bn is welcome but was almost a throw-away line.--Fiona Fernie

Dawn Register, partner in tax dispute resolution at BDO says: “It not clear exactly how this figure will be collected, but HMRC has mentioned preventing the illicit trade of tobacco, tackling Construction Industry Scheme (CIS) abuse and making it more difficult for non-compliant traders to operate in the hidden economy, with taxi and hire vehicle firms specifically mentioned. 

“This is an obvious and ongoing agenda by the Conservative government to tackle tax evasion and avoidance as after many spending promises today the Chancellor desperately needs to raise money. The £35 billion tax gap is something of a “hidden war chest” to prise open."

HMRC will also be given additional compliance officers and technology to do collect these taxes.

But Fiona Fernie, partner at Blick Rothenberg calls the commitment to tax evasion a “throw away line”. 

Ms Fernie says: “The government’s funding to clampdown on avoidance and evasion and raise £4.4bn is welcome but was almost a throw-away line.”

She adds: "At the moment a huge amount of funding is wasted by HMRC’s ‘scatter-gun approach’ in investigating potential tax losses.”

George Bull, senior tax partner at RSM UK says:  “The Treasury hopes that, by adding 1,300 staff to HMRC’s operational teams and by giving them new powers, an extra £4.4 billion of revenues will be collected over the next five years. 

He explains, while HMRC has made inroads into the tax gap over the years, its progress has been hampered by a lack of resources. 

“Additional resource could reduce evasion and non-payment, although the financial shock of the Coronavirus will mean that HMRC will have to agree extended payment arrangements with honest businesses whose cashflow is being damaged as revenues plunge because of Covid-19,” he adds. 

National Insurance

The chancellor announced that the national insurance threshold will be increased from April; meaning that taxpayers will pay national insurance on earnings over £9,500, up from £8,632 at the moment. 

The raising the NI threshold will benefit employees currently earning more than £9,500. Each [person] will benefit from an NI reduction of £104 per year, just £2 per week,” says Mr Bull. 

Additional resource could reduce evasion and non-payment, although the financial shock of the Coronavirus will mean that HMRC will have to agree extended payment arrangements with honest businesses.--George Bull

He explains that in addition, low-paid workers who do not earn enough to pay (national insurance contributions) NIC will not lose out on NI credits to help fill gaps in their NI record and so protect their entitlement to certain benefits, including the state pension. 

“Because the upper earnings limit will not increase from the current £50,000 per annum the saving for the highest earners will be the same,” he adds. 

The Budget also announces reforms to the intangible fixed assets regime to reinforce the attractiveness of the UK as a place for businesses to own and manage intellectual property, a review of the UK funds regime, as well as an industry working group on the future of VAT and financial services.

saloni.sardana@ft.com