Summary of Budget 2020
Summary of the key announcements from the Chancellor's 2020 Budget
New National Living Wage
From April 2020, a new National Living Wage of £8.72 an hour for the over 25's and £4.55 for the under 18's.
Tax Free Personal Allowance
The tax free personal allowance - the amount people earn before they have to start paying Income Tax, is £12,500 in 2020/21.
Currently, Inheritance Tax (IHT) is charged at 40% on estates over the tax free allowance of £325,000 per person. Married couples and registered civil partners can pass any unused allowance on to one another. Each individual will be offered a new main residence transferable nil-rate band so they can pass their home on to their children or grandchildren tax-free after their death.
Reforming Dividend Tax
The dividend tax credit (which reduces the amount of tax paid on income from shares) was replaced by a new £5,000 tax-free dividend allowance for all taxpayers on 6 April 2016. Tax rates on dividends income was increased. This simpler system will mean that only those with significant dividend income will pay more tax. Investors with modest income from shares will see either a tax cut or no charge in the amount of tax they owe. For dividend income above this allowance, basic-rate taxpayers will pay 7.5%, while higher-rate taxpayers will pay 32.5% tax, and those who pay the additional rate of 45% will pay 38.1% tax.
The Employment Allowance
Businesses had their employer National Insurance bill cut by another £1,000 on April 2016, as the Employment Allowance rose from £2,000 to £3,000. The Employment Allowance gives businesses and charities a cut in the employer National Insurance they pay. Due to this businesses are able to employ four people full time on the National Living Wage and pay no National Insurance at all.
Reformed Road Tax
The road tax system was revised to make it fairer and sustainable. In 2017, there was a flat rate of £140 for most cars, except in the first year when tax was remained linked to CO2 emissions that cars produce. Electric cars won't pay any road tax at all and the most expensive cars will pay more. Existing cars won't be affected - no one will pay more for a car that they already own. The money brought in from road tax in England will be spent on England's roads from 2020. The Government has extended the deadline for the first MOT of a new car and motorcycle from three years to four years.
The main rate of Corporation Tax was 19% in 2019, it will stay at 19% in 2020.