Budget 2020: What It Means For You

Chancellor Rishi Sunak delivered his first Budget today. It focused chiefly on containing the economic fallout from the coronavirus, but there were many other notable policy announcements alongside.

The Government will spend an extra £175bn over the next five years. Sunak said that this will increase long-term productivity by 2.5 per cent between now and 2025.

Sunak announced emergency measures to tackle coronavirus. This includes a three-point plan that which covers support for the NHS, support for workers, and backing for employers.

He announced the NHS will get whatever funding it needs (initially £5bn). There will be a £500m hardship fund for local authorities and £500m boost for the welfare system by allowing people to access Universal Credit more easily.

Personal Income & Tax

There were no changes to income tax rates and allowances. The annual threshold for employees’ National Insurance Contribution will raise from £8,362 to £9,500, which will reduce the tax they have to pay from 6th April.

The living wage will rise by 6.2 per cent to £10.50 by the middle of the decade. It had already been planned to raise the national living wage to £8.72 an hour, from April 2020.

More money to be given to HMRC to clamp down on tax avoidance.

Pensions

Sunak announced pension reform and Lifetime Allowance increases for NHS doctors. This will help them continue work.

The Lifetime Allowance for pensions will increase from £1,055,000 to £1,073,100 for 2020/21.

Threshold income for Tapered Annual Allowance will increase from £110,000 to £200,000 and adjusted income from £150,000 to £240,000 for 2020/21.

The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000. This means that all those with adjusted income of £312,000 or over will have an annual allowance of £4,000.

The Government will shortly publish a call for evidence on pension tax relief administration.

Members of occupational pension schemes which use the net pay arrangement don’t benefit from tax relief on their pension contributions if they earn less than the personal allowance. They may benefit from a top-up to their pension contributions to bring them in line with those who contribute to personal pensions through the relief at source method.

Retail Price Index (RPI) which affects payment of pensions and annuities is also to be reviewed.

Investments

The limit that can be invested in Junior ISAs and Child Trust Funds will increase from £4,368 to £9,000 with effect from 6 April 2020. The adult ISA limit for 2020/21 remains unchanged.

Small and Medium Sized Businesses (SMEs)

There was much support for SMEs. Business rates for retailers, pubs, places of entertainment and hospitality will reduce. Government will also support businesses with less than 250 employees by refunding Statutory Sick Pay (SSP) within 14 days, as it announced that SSP will be payable from day 1 not day 4. The self-employed will also find it quicker and easier to obtain benefits from day 1 instead of waiting until day 8.

Any loans required by businesses to cover the temporary situation with Coronavirus will not have to pay fees.

Entrepreneurs’ relief will reduce from £10m to £1m. This gives a 10% cut in the Capital Gains Tax paid on the sale of their business.

Lifestyle

There will be no extra duty on whisky, beer and spirits and duty frozen on cider and wine. Fuel duty will also remain frozen for another year.

£500 million will be be given to a hardship fund to Local Authorities. An additional £200m is to build flood defences if flooding had happened before.

More money available to tarmac road, airports and ports as well as potholes.

Good news for readers. From December 1st the Government will abolish VAT on all reading materials whatever the subject and medium.

There was much more in terms of grants towards Research & Development, education and universities, and environmental issues. For example, the plastic tax and making it cheaper to buy lower emission vehicles.

There was only a vague reference to social care funding, despite Sunak repeatedly calling it the Budget of ‘getting things done’. However, £650m will be for the homeless creating 6,000 new places.

It seems a generous Budget and much of it is very welcome. However it will be interesting to see where the money is going to come from to cover all this support. Sunak said that this is a Budget for “Prosperity tomorrow”. It is hard to see how this can be achieved without the coffers being topped up given that we are facing a temporary disruption to the economy.