The Budget was announced this week by the newly appointed Chancellor, Rishi Sunak. Having had just a month in the job to prepare and with the economy under pressure from the Coronavirus outbreak, there was some uncertainty about the plans Mr Sunak would reveal. While there aren’t any huge surprises, as usual there are both positives and negatives for consideration. How you will view the effectiveness of the Budget will much will depend on your personal circumstances.
Coronavirus
Sick Pay:
During the Coronavirus outbreak, UK employees will get statutory sick pay from the first day off work, rather than the fourth. Small businesses with under 250 employees can reclaim the cost of paying sick pay for up to 14 days from the government. Sick pay now applies to all employees told to self isolate, regardless of whether or not they are ill. Self employed workers are entitled to an Employee Support and Allowance payment from day one of illness, provided they meet certain conditions.
Hardship Fund:
A ‘hardship fund’ has been announced for local councils to help vulnerable people in their area who lose income due to the virus. The money will be distributed through council tax discounts.
Interest Rates:
Although not part of the official budget, the Bank of England coordinated with the government on support measures to announce that interest rates are being cut from 0.75% to 0.25% – the lowest rate in history.
Pensions
Tapered Annual Allowance:
In good news for high earners, the earnings threshold assessed is increasing by £90,000, to £200,000 (threshold income). Adjusted income is also increasing by £90,000, to £240,000. The standard annual allowance is reduced by £1, for every £2 of adjusted income over £240,000. However, in the next tax year, the minimum reduced tapered allowance is decreasing by £6,000 a year. This means those earning over £312,000 will now only be entitled to a £4,000 annual allowance. This will affect all those with income above the thresholds, not just those within the NHS.
Lifetime Allowance:
The Lifetime Allowance is increasing to £1,073,100 in the new tax year, in line with Consumer Prices Index (CPI) which rose 1.7% in the year to September 2019. The new lifetime allowance will be slightly higher than expected, at £100 more.
State Pension:
The new state pension is increasing by 3.9% to £175.20 a week. Although, most pensioners receive the old state pension, which is also increasing by 3.9% to £134.25 per week.
Tax
Entrepreneur’s Relief & Capital Gains Tax:
The lifetime limit for gains qualifying for entrepreneur’s relief is being reduced to £1,000,000 from £10,000,000 with immediate effect. The capital gains tax annual exemption will rise to £12,300 for individuals and £6,150 for trustees. Capital gains made on the sale of businesses which exceed the new limit will be taxed at 20% for higher and additional rate taxpayers.
National Insurance:
The National Insurance contribution threshold for employees and self-employed people is increasing from £8,632 to £9,500 in the new tax year. This tax break will effect millions of workers, with 500,000 no longer having to contribute at all and those still paying saving on average £85 a year.
Working From Home:
From April, the flat rate allowable expenses deduction for people working at least 25 hours a month from home will rise to £6 per week, up from £4. The flat rate does not cover phone or internet expenses but does include utilities.
Savings
Junior ISAs:
The Junior ISA and Child Trust Fund allowance is rising dramatically from £4,368 to £9,000. This is great news for parents and grandparents, who can now save more in a tax efficient account for their children and grandchildren. For savers over 18, the cash ISA threshold will stay at £20,000 for the next year.
