Budget 2020 – Corporate and Business Tax

Corporation tax rates

The Chancellor confirmed that, as stated in the Conservative manifesto for the election last year, corporation tax will remain at 19% rather than falling to from 1 April 2020 17% as previously announced.  It will remain at 19% for the year beginning 1 April 2021.

National Insurance (NI) for the self employed

Class 2 NI will be £3.05 per week for 2020-21

Dividend tax

The nil rate dividend allowance will remain at £2,000 for 2020-21.

Making Tax Digital

Making Tax Digital (MTD) has been going through consultations over the past few years.   There were no new announcements in the Budget.

A reminder that the plan is that, under the scheme, limited companies, unincorporated business and landlords will have to use online software to report their income and expenses to HMRC at least quarterly.

From April 2019, all VAT registered businesses with a turnover in excess of the VAT threshold (£85,000) have been required to file their VAT returns through compliant software under making tax digital.

Capital Allowances

Businesses can claim an annual investment allowance” (AIA) when they buy plant and machinery for use in the business.  The standard limit is £200,000, which means that businesses can claim an immediate tax write down of the first £200,000 of expenditure every year.  The AIA was temporarily increased to £1,000,000 for two years from 1 January 2019.  It will revert to £200,000 from 1 January 2021.

For asset purchases in excess of the AIA, as well as some non-qualifying expenditure such as cars, expenditure goes into one of two pools – the main rate or the special rate pool, with current writing down allowances of 18% and 6% respectively, on a reducing balance basis.

Cars with emissions of under 50g/km are entitled to a 100% tax write down in the first year, those between 50g and 100g/km currently go into the main (18%) rate pool and those with higher emissions into the special (6%) rate pool.  From April 2020, the threshold for 100% write down will reduce to zero emissions, and the threshold for the main rate will reduce to 50g/km.

From Budget Day, 29 October 2018, a new capital allowance (the Structures and Buildings Allowance) was introduced, at a rate of 2% for new qualifying non-residential structures and buildings on a straight-line basis.  This allowance was increased to 3% in Budget 2020.

Off Payroll Working

The government confirmed that the reform the off-payroll rules in the private sector will come into effect from 6 April 2020.

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