Chancellor Rishi Sunak delivered his first and this Government’s first Budget of the new Parliament on Wednesday, 11th March. This was a very different Budget compared to recent history, not only in its strategy but also that it was in two parts - the short term impact and challenge of Coronavirus and the short, medium and long term plans for the economy.
On the surface, this was a case of spend spend spend. However, as with most Budgets, what is presented is approximately 10% of The Finance Bill* so the devil, as they say, is always in the detail and we’ll see how this could unravel over the coming days and weeks.
- £30 billion stimulus to tackle the effect of the virus and a promise to the NHS to give them whatever they require to meet this challenge
- Statutory sick pay available from day one (not the 4th day of illness) - this will be available to all those who self-isolate, not just those actually ill
- The Government will refund sick pay costs incurred by small firms (fewer than 250 workers)
- Not available to self-employed or workers on under £118 a week. For those workers, Employment & Support Allowance (ESA) sick benefit will be available from Day 1 not Day 8
- Minimum income floor in Universal Credit for self-employed to be temporarily axed
- People will not have to physically visit a Jobcentre to receive benefits
- Businesses to receive up to £1.2 billion in Coronavirus Business Loan Interruption Scheme
- £2.2 billion grant scheme for small firms and dedicated helpline to defer tax payments
- £5 billion COVID-19 "response fund" to support NHS and other public services.
- The two tapered annual allowances (currently £110,000 threshold and £150,000 adjusted) will each be raised by £90,000. This means that from 2020/21 the threshold income will be £200,000, so individuals with income below this level will not be affected by the tapering, and the annual allowance will only begin to taper down for individuals who also have an adjusted income above £240,000. For those on the highest incomes, the minimum level to which the annual allowance can taper down to will reduce from £10,000 to £4,000 from April 2020. This further reduction will affect individuals with total income (including pension accrual) of over £300,000.
- Corporation Tax remains at 19%
- Inheritance tax threshold from April 2020 is due to increase to £500,000 (this includes main residence), making the total combined nil rate bands for married couples £1 million
- No national insurance contributions on the first £9,500 of your earnings (an increase from the current £8,632)
- Tampon tax abolished (the 5% VAT charged on women's sanitary products) from January 2021
- Stamp duty - a 2% stamp duty surcharge for non-UK residents will be introduced from April 2021
- Junior ISA (JISA) and Child Trust Funds (CTFs) - savings limit more than doubled to £9,000 a year from 2020/21.
- Entrepreneurs' relief lifetime limit reduced from £10 million to £1 million (this is applied when a business owner decides to sell or liquidate their business. It enables company founders selling their businesses to pay capital gains tax at a rate of 10% as opposed to the typical 20% that usually applies to gains of up to £10 million)
- Business rates retail discount rises from 50% to 100% in 2020/21 for small firms (properties with a rateable value under £51,000)
- Pubs' business rates discount rises from £1,000 to £5,000 for those with rateable value under £100,000
- £5 billion programme of super-fast broadband by 2025.
- Minimum wage for over-25s will rise by 51p to £8.72 an hour from April 2020. It will also rise to £8.20 (age 21 to 24), £6.45 (18 to 20), £4.55 (under 18) and £4.15 (apprentice)
- National Living Wage will reach two-thirds of median earnings by 2024 - forecasting a wage for over-25s of £10.50 an hour.
- New neonatal pay and leave entitlement (approximately £160 a week for up to 12 weeks) for parents of unwell new-born babies
- Breathing space of up to 60 days for people in problem debt from 2021
- 5 week wait and two-child limit remain in Universal Credit
- Working age benefits to rise by 1.7% in April, marking the end of years of the benefit freeze
- Personal Independence Payment (PIP) claimants will not have an award period of less than 18 months.
Cigarettes and alcohol
- Wine, beer, cider and spirits duties all frozen this year
- Tobacco duty rise at RPI plus 2%
- Hand rolling tobacco duty rise at RPI plus 6%.
Vehicles and petrol
- Fuel duty remain frozen for another 12 months
- £1.6 billion-a-year cut to polluting red diesel tax relief (few industries like agriculture and fishing exempt).
- £2.5 billion funding to repair 50 million potholes over the next five years.
- Funding for flood defences is expected to be doubled to £5.2 billion over the next six years
- £120 million to repair all flood defences damaged this winter
- £200 million will be provided directly to local communities to build their local resilience
- Manufacturers will be charged £200 a tonne on non-recycled plastic from April 2022
- Electricity levy from April 2022 but raise gas levy to help tackle the climate crisis.
*The Finance Bill enacts the proposals for taxation made by the Chancellor of the Exchequer in their Budget statement and brings them into law. Once the House of Commons has agreed the Budget Resolutions, the Finance Bill starts its passage through Parliament in the same way as any other bill.
If you feel that any of the points raised in this article affect you, please contact your Dentons Wealth Adviser.