Budget 2020 summary
01 April 2020
Lora Murphy ACIPP, CIPP senior policy liaison officer, provides a summary of key relevant announcements.Chancellor of the Exchequer, Rishi Sunak, delivered a Budget speech that was wide-ranging and with measures intended both to honour some general election manifesto commitments yet also address social and economic issues already requiring attention or arising because of the COVID-19 pandemic. Further information can be found in the CIPP’s Budget 2020 Summary (http://bit.ly/38TeGsp).
Income tax for 2020/21
Income tax allowances across the UK are as follows:
- personal allowance – unchanged at £12,500
- marriage allowance – unchanged at £1,250 (i.e. 10% of the personal allowance)
- married couple’s allowance – increases to £9,075, with a minimum of £3,510
- blind person’s allowance – increases to £2,500.
For taxpayers in England, Wales and Northern Ireland there are no changes to the rates or bands of income tax for 2020/21. The Welsh government announced that it would not vary the Welsh rate of income tax. For Scottish taxpayers, however, the rates and bands have changed; see table.
| Scotland | Band | Rate |
| Starter rate | £12,501–£14,585 | 19% |
| Scottish basic rate | £14,586–£25,158 | 20% |
| Intermediate rate | £25,159–£43,430 | 21% |
| Higher rate | £43,431–£150,000 | 41% |
| Top rate | Above £150,000 | 46% |
Company cars, vans and fuel
From 6 April 2020, the following have effect:
- car fuel benefit charge – the standard amount increases to £24,500 (from £24,100)
- van fuel benefit charge – the standard amount increases to £666 (from £655)
- van benefit charge – the standard amount increases to £3,490 (from £3,430). For zero-emission vans the amount is 80% (previously 60%) of the standard charge.
The diesel supplement for company car tax is unchanged at 4%, but cars meeting the Euro 6d standard (also known as Real Driving Emissions Step 2) are exempt from the supplement. The maximum appropriate percentage is also unchanged at 37%.
Significant changes to the taxation of company cars, which were announced in previous Budgets, also have effect from 6 April 2020.
From April 2021, zero-emission vans will not be subject to the van benefit charge.
Tax exemptions
Leavers from the care system
Finance Bill 2020 will include measures to implement an income tax exemption for the bursary paid by the Education and Skills Funding Agency to care leavers aged between 16 and 24 who begin an apprenticeship. A corresponding exemption will apply for NICs purposes.
Tax treatment of welfare counselling provided by employers – With effect 6 April 2020, the scope of the tax exemption for counselling service will be extended to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services.
Working at home allowance
The tax-exempt amount that an employer can pay each week to an employee to meet the additional household costs incurred when home-working arrangements apply, increases to £6 in April 2020.
NICs
Rates
There are no changes to the rates of National Insurance contributions (NICs) in tax year 2020/21.
Thresholds and limits
Some of the earnings thresholds and limits for class 1 NICs for tax year 2020/21 are changing; see the table. (Note that the upper secondary threshold and the apprentice upper secondary threshold are the same as that for the upper earnings limit (UEL).)
NICs holiday
From tax year 2021/22, employers will be able to claim a NICs holiday for the first year of civilian employment of armed forces veterans. The holiday will exempt employers from any NICs liability on the veteran’s salary up to the UEL. Prior to a digital service being available to employers from April 2022, transitional arrangements will operate. The government will consult on the design of the exemption.
Employment allowance
Those employers eligible to claim the employment allowance will be able to reduce their class 1 NICs liability by up to £4,000 in 2020/21.
| Weekly | Monthly | Annual | |
| Lower earnings limit | £120 | £520 | £6,240 |
| Primary threshold | £183 | £792 | £9,500 |
| Secondary threshold | £169 | £732 | £8,788 |
| Upper earnings limit | £962 | £4,167 | £50,000 |
National minimum/living wage
New national minimum rates apply from the first pay reference period beginning on or after 1 April 2020; see table.
Economic conditions permitting, the government’s intention is that the national living wage (NLW) will be extended to all workers aged 23 and over in April 2021, and to workers aged 21 and over by 2024.
The remit of the Low Pay Commission will include a revised target for the NLW of two-thirds of median earnings by April 2024. Based on current forecasts, this would be over £10.50 per hour.
| National minimum/living wage - merge | |
| Age 25 and over | £8.72 |
| Age 21–24 | £8.20 |
| Age 18–20 | £6.45 |
| Age 16–17 | £4.55 |
| Apprentices | £4.15 |
| Accommodation offset (daily) | £8.20 |
Pensions
Tax relief on contributions
The government has announced a call for evidence this spring on how to address the different outcomes for lower earners, depending on whether their pension scheme uses relief at source or the net pay arrangement. Views will be sought on how the two systems could be aligned.
Lifetime allowance
The lifetime allowance for pensions accruals and savings in a registered pension scheme will be set at £1,073,100 from 6 April 2020.
Annual allowance
From 6 April 2020, the annual allowance adjusted income limit will increase to £240,000; the threshold income limit will be set at £200,000; and the minimum tapered annual allowance will reduce to £4,000.
Collective money purchase pension schemes
Legislation will be amended so that these schemes can operate as registered pension schemes.
Various leave entitlements
Neonatal leave and pay
The government intend to create an entitlement to up to twelve weeks’ paid leave for employees whose babies spend a minimum of a week in neonatal care.
Carers’ leave
The government will consult on a new in-work leave entitlement for employees with unpaid caring responsibilities, such as for a family member or dependents. This will help individuals to balance their caring responsibilities with work, particularly women who disproportionately undertake unpaid caring activities.
COVID-19
A key part of the Budget announcements and measures concerned supporting people and businesses in the UK affected by the coronavirus (‘COVID-19’) pandemic.
Statutory sick pay (SSP)
SSP is to be available to eligible individuals diagnosed with COVID-19 and to those who are unable to work because they are self-isolating in line with government advice. This is in addition to the change previously announced by the prime minister that SSP will be payable from day one instead of day four for affected individuals.
Workers who are advised to self-isolate for COVID-19 will be able to obtain an alternative to the fit note by contacting NHS 111, rather than visiting a doctor, if their employer requires evidence. Further details are to be released.
The government will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim SSP paid for sickness absence due to COVID-19. Eligibility criteria include the following: up to two weeks’ SSP can be claimed per eligible employee off work because of COVID-19; and only employers with fewer than 250 employees can claim (determined by the number of employees as at 28 February 2020).
Although employees will not need to provide a fit note from a general practitioner, employers should maintain records of staff absences.
The eligible period for the scheme will commence the day after the day when amending regulations on the extension of SSP to self-isolators come into force.
The government will work with employers to set up the repayment mechanism for employers as soon as possible.
Workers not eligible for SSP, such as the self-employed or those earning below the class 1 NICs lower earnings limit, can claim universal credit or contributory employment and support allowance.
Support with tax affairs
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HM Revenue and Customs’ ‘time to pay’ service. Those concerned about being able to pay tax due to COVID-19 can contact helpline 0800 0159 559 for advice and support.
This article was featured in the April issue of Professional in Payroll, Pensions and Reward magazine and was correct at the time of publication.