Personal Tax

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Increasing National Insurance thresholds – The Budget confirms the government’s commitment to increase the thresholds at which employees and the self-employed start paying National Insurance contributions (NICs) to £9,500 from April 2020.84 Around 1.1 million people will be taken out of paying Class 1 and Class 4 NICs entirely.85 This is the first step in meeting the government’s ambition to increase these thresholds to £12,500, which would save a typical employee over £450 per year.86 (12)

Income tax and National Insurance exemptions for bursary payments to care leavers – The government will legislate in Finance Bill 2020 to introduce an income tax exemption for the bursary paid by the Education and Skills Funding Agency to care leavers aged 16 to 24 who start an apprenticeship. Corresponding legislation will be introduced to mirror the income tax exemption for NICs. This legislation will confirm HMRC’s current position that care leavers’ bursaries are tax-exempt, including those paid prior to the 2020-21 tax year.

Increasing the flat rate deduction for homeworking – The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.

Tax treatment of the Troubles Permanent Disablement Payment Scheme – The government will legislate in Finance Bill 2020 to introduce income tax, inheritance tax and capital gains tax exemptions for payments made on or after May 2020 under the Troubles Permanent Disablement Payment Scheme.

Tax treatment of social security benefits in Scotland – The government will legislate in Finance Bill 2020 to clarify the income tax treatment of three new social security payments. The legislation will confirm that the following three benefits introduced by the Scottish government are exempt from income tax: Job Start; Disability Assistance for Children and Young People; and, the Scottish Child Payment. The legislation also includes a new power which permits the government to confirm by secondary legislation when new social security benefits introduced by the UK government or any of the devolved administrations will be tax exempt. The changes will take effect from April 2020.

Tax treatment of the Windrush Compensation Scheme – As announced in April 2019, the government will legislate in Finance Bill 2020 to introduce exemptions from income tax, inheritance tax and capital gains tax for payments made on or after 3 April 2019 under the Windrush Compensation Scheme. The legislation also includes a new power to exempt any necessary future compensation payments by statutory instrument from income tax, inheritance tax and capital gains tax, where appropriate. (64)

Review of changes to the off-payroll working rules (commonly known as IR35) – At Budget 2018 the government announced that it would reform the off-payroll working rules in the private and third sectors from April 2020. The government has recently concluded a review of the reform, and is making a number of changes to support its smooth and successful implementation. The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.

National Insurance holiday for employers of veterans in first year of civilian employment – To support the employment of veterans, the government is meeting the commitment to introduce a National Insurance holiday for employers of veterans in their first year of civilian employment. A full digital service will be available to employers from April 2022; however, transitional arrangements will be in place in the 2021-22 tax year which will effectively enable employers of veterans to claim this holiday from April 2021. The holiday will exempt employers from any NICs liability on the veteran’s salary up to the Upper Earnings Limit. The government will consult on the design of this relief. (16)

Tax treatment of welfare counselling provided by employers – The government will extend the scope of non-taxable counselling services to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The changes will take effect from April 2020.

Top Slicing Relief (TSR) on life insurance policy gains – Following a recent First-Tier Tribunal case, the government will legislate in Finance Bill 2020 to put beyond doubt the calculation of TSR by specifying how allowances and reliefs can be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020. (49)

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