Xentum | Xentum – Budget Update – March 2020

Xentum – Budget Update – March 2020

March 12, 2020 - 8 minutes read

Posted by Claire Parker

Markets Update

Where we are

  • The US has now entered a “bear market” which is a fall of 20% of an an index over a set period of time.
  • The is the fastest 20% decline in history going back to 1915
  • Governments worldwide are launching stimulus packages to support their economies
  • The UK and the US are getting ready for a sharp rise in positive cases.
  • The Virus seems to be subsiding in China and South Korea and factories are being reopened.
  • Oil is significantly lower over a disagreement on oil supply between Russia and Saudi Arabia.
  • We are starting to see worldwide travel bans

Our Thoughts

  • It is completely normal to feel nervous and scared about the markets in a time like this. Many of us are reading the news and social media more than ever and that will create a sense of fear and panic as we are dealing with an unknown at this point.
  • We have spent years talking about being ready for moments like this where markets test our resolve. The data and evidence suggests we wait it out and the important job we have is to manage our behaviour.
  • We are likely to see big swings in markets over the coming months as short term traders try to work out what the impact is. This is not a game we want to play or take notice of.
  • All of our clients are long term investors and have solid financial plans that take these moments into consideration. As a company we have always been cautious about the financial plans that we build and it is important to know that your financial plan is the most important aspect and really nothing will have changed with this.
  • This is the hardest part of being a long term investor. We often think “this time it is different” or “what if I take money out of the market until it calms down”.  Unfortunately neither of these approaches are backed up by the data or evidence.  We simply have to ride it out.  You should feel assured that the best long term investors in the world take the same approach.

We are happy to revisit your financial plan at any point and help reassure, however my advice would be to sit tight, consider your own safety and health position and try to ignore the scary headlines.


So was it the Coronavirus Budget, or the Infrastructure Budget? Or was it, as the Chancellor declared at the end of his speech, the ‘people’s Budget from a people’s government?’ It was certainly a Budget that was high on spending commitments and one that the Chancellor declared would ‘get things done.’ Now where have we heard that before..?

Almost three months to the day after the General Election, new Chancellor Rishi Sunak delivered his first Budget speech. He delivered it, not as he might have expected, against a backdrop of optimistic economic forecasts and the opportunities of Brexit, but against the growing threat of the coronavirus outbreak, and the impact it might have on the UK economy.

Key changes:

There were some big changes in this budget particularly around the pensions tapering annual allowance and entrepreneurs relief.

Personal taxation and allowances

What Entrepreneurs’ Relief reduced back to £1m from current £10m.
When The measure will take effect for Entrepreneurs’ Relief qualifying disposals made on or after 11th March 2020.
Comment Many had expected Entrepreneurs’ Relief to be fully abolished but Sunak has stopped short of this. The relief gives business owners a lower capital gains tax (CGT) rate of 10% on the sale of businesses over their lifetime. The lifetime limit, on which the 10% is eligible, reduces from £10m to £1m. The standard rate of CGT is 20%.


What Increase in National Insurance threshold for employees and the self employed to £9,500.
When From April 2020.
Comment This will save all workers earning more than £12,600 around £100 a year. Currently, employees pay 12% of their earnings in National Insurance contributions once they earn between £8,632 and £50,000 a year.

Pensions and savings

What The Junior ISA allowance will rise from £4,368 to £9,000. The same limit will apply to Child Trust Funds (CTFs). The adult ISA allowance remains unchanged.
When From 6th April 2020.
Comment There is a considerable increase in the amount that can be invested in a tax efficient way for children.


Until April 2017, the adult ISA allowance increased each year, but since then it has remained unchanged at £20,000.


What The lifetime allowance (LTA) will increase in line with CPI for 2020-21, rising to £1,073,100.
When From 6th April 2020.
Comment The LTA is the maximum amount an individual can accrue in a pension scheme whilst retaining the tax benefits. The LTA has been progressively whittled away since it was introduced in 2006. But in 2017, when the LTA stood at £1m, it was announced that it would from now on be increased each year in line with inflation.


What An increase in the pensions annual allowance taper thresholds of £90,000 each.

The minimum annual allowance is decreased from £10,000 to £4,000.

When Benefits accrued on or after 6 April 2020.
Comment The threshold income for high earners, after which their annual allowance is reduced, will be increased to £200,000. The annual allowance will only begin to taper down for individuals who also have an ‘adjusted income’ above £240,000.

Those with an adjusted income of £312,000 or more will now have a tapered annual allowance of £4,000.

Primarily, this is the government’s response to concerns from doctors and hospital consultants that they were penalised for working extra hours. The move will help reassure some doctors they can take on additional work without worrying about unexpected tax bills.

Business investment and taxation

What Corporation tax will remain at 19%.
When N/A.
Comment The government had previously promised to reduce the level of corporation tax from 19% to 17%. The headline rate of 19% remains one of the lowest in the G20.


What Employment Allowance (EA) increased from £3,000 to £4,000.
When April 2020.
Comment Businesses with a Class 1 National Insurance bill below £100,000 in the previous tax year will be eligible, a measure that the government says will benefit around 500,000 businesses.


What Changes to off-payroll working rules (IR35) to go ahead.
When From 6th April 2020.
Comment Measures already announced will come into force. The new legislation will affect contractors working through a Personal Service Company, recruitment agencies and with end clients who are a large or medium sized company.


What Changes in business rates for smaller businesses and additional measures in response to coronavirus.
When From 1st April 2020.
Comment The government had already announced that the business rates retail discount would be increased to 50% for properties with a rateable value below £51,000 in England. In light of coronavirus, they are increasing this to 100% for 2020-21.


The relief will also be extended to include the leisure and hospitality sectors. In addition, the government had announced the introduction of a £1,000 Business Rates discount for pubs in England with a rateable value of less than £100,000. In response to the coronavirus, this will be increased to £5,000.


What Structures and buildings allowance (SBA) rate change increasing from 2% to 3%.
When The change will take effect from 1st April 2020 for corporation tax and 6th April 2020 for income tax.
Comment An increase in the annual rate of the structures and buildings allowance to 3% will provide over £1 billion in additional relief for businesses by the end of 2024-25.


Together with measures to incentivise spending on R&D, this will unlock new investment and further enhance the international competitiveness of the UK tax system.


What An extension in funding of the British Business Bank’s Start-Up Loans programme to the end of 2021-22.
When Immediately.
Comment This will reportedly support up to 10,000 further entrepreneurs across the UK to access finance to start a business. It is an important part of the government’s ambition to level up opportunity across the UK and support enterprise.

 Other measures

What The government has launched consultations on overhauling the Retail Price Index (RPI) measure of inflation.
When Consultation until 22nd April 2020.
Comment This consultation follows proposals presented last March to address the shortcomings of RPI as a measure of inflation. One of the key aims is to align its calculation with that of the consumer price index (CPI) including housing cost.


What National Living Wage (NLW) to rise by 6.2%.
When April 2020.
Comment A new, ambitious target for the NLW to reach two thirds of median earnings and to extend this to workers aged 21 and over by 2024 (provided economic conditions allow).


It had already been planned to raise the national living wage to £8.72 an hour, from April 2020. This matches a commitment made in 2013 to increase it to the level of the National Minimum Wage. It is projected to be £10.50 by 2024.


What A zero rate of VAT applying to sanitary products.
When 1st January 2021.
Comment This honours the government’s commitment to scrapping the unpopular ‘tampon tax’ as part of a conscious effort to level up the UK and give equal opportunities to all.




There are some fairly substantial changes in this budget that may affect your financial plan.

We have already updated our financial planning software to reflect the changes and we will be considering the impacts on all clients over the next few months.

It is likely that there will be quite a bit of structuring and advice around this budget particularly around the entrepreneurs relief and pension allowance changes.

We are surprised that inheritance tax was not altered after they launched a big consultation on the controversial tax.

Again, please feel free to discuss any of this with your financial planner.