BudgetMar 11 2020

What advisers can expect from today’s Budget

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What advisers can expect from today’s Budget
Rishi Sunak, chancellor of the exchequer

The chancellor will present his plans for the coming legislative period this afternoon. Here’s what advisers can expect from the Budget:

1 Some taper tinkering

Many are predicting Mr Sunak will raise the point at which tapering of the annual allowance kicks in from £110,000 to £150,000.

These new proposals are expected to give doctors and others caught by the tapered annual allowance greater clarity over whether they risk being hit with a significant tax bill.

Under current rules, the taper gradually reduces the annual allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

2 A tax relief shake up

In more pensions predictions, there has been speculation over changes to the pension tax relief in a bid to make the system fairer for those on lower incomes.

Before Sajid Javid suddenly resigned as chancellor last month, he was considering cutting tax relief to 20 per cent across all income bands, rather than having the 40 per cent enjoyed by higher earners as under current rules tax relief is paid on savers' pension contributions at the rate of income tax they pay.

According to Royal London’s Clare Moffat, head of business development, this could undermine auto-enrolment and potentially cause some to be double taxed.

However several Tory MPs have expressed unease at such proposals, casting doubt over whether Mr Sunak will go ahead with them.

3 The end of entrepreneurs relief 

Today’s Budget could see the end of entrepreneurs relief — the rules which allow business owners of two years or over to pay less capital gains tax when they sell (10 per cent rather than 20 per cent).

There have been reports Mr Sunak is set to scrap the tax relief in today’s announcement. 

Bosses at companies such as Gunner & Co and Soprano Mergers and Acquisitions have previously warned abolishing the relief would see fewer sellers come to market, including in the adviser space.

4 No tax jumps

During December’s general election campaign, prime minister Boris Johnson guaranteed not to raise the rate of income tax, VAT or national insurance.

The Conservative’s manifesto stated: “This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”

In fact Mr Sunak is expected to raise the national insurance threshold to £9,500 in today’s Budget, a move the Tories claim would be a tax cut for 31m workers.

5 IR35 confirmation

Today’s Budget could see the final nail in the coffin for those campaigning against the government’s controversial changes to off-payroll working rules.

The rules, more commonly known as IR35, are anti-tax avoidance rules which were introduced in 2000 to all public sector contractors and freelancers who do not fall under HM Revenue & Customs’ definition of being self-employed.

From April 2020, the rules are widening to include every medium and large private sector business in the UK.

Businesses and contractors have fiercely opposed the changes, but today’s Budget is expected to confirm the rules will go ahead despite a Treasury review and House of Lords investigation.

6 Coronavirus

Many of these changes, which have been the subject of speculation for months, could be blown out of the water by the recent economic turbulence caused by the rapid spread of the Covid-19 strain of coronavirus.

Many of the main stock market indices have been plummeting over recent days amid concerns about the economic impact of the virus, which were compounded earlier this week when Saudi Arabia decided to launch an oil price war by slashing prices and producing more oil.

Mr Sunak is widely expected to provide more money to the NHS to help it tackle the spread of Covid-19, and many are also predicting he will turn on the spending taps to stimulate the economy.

imogen.tew@ft.com

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