The new Chancellor Of The Exchequer, Rishi Sunak, presented his first UK Budget today.
Inevitably, the main issue of the day was Coronavirus, with the Chancellor opening his speech saying the economic disruption around the virus would be significant, but temporary. “The UK economy is robust, and public finances are sound,” Mr Sunak said.
One important change worth noting for savers is that tax relief on the Pensions of high earners is being altered. Once annual income exceeds £110,000, a person’s annual allowance (the amount they can claim tax relief on) decreases dramatically. This has become a problem as the income cap includes the value of pensions earned, not just salary, and there are hefty charges for going over the annual allowance. This year’s budget saw this amount increased to £200,000. This is good news as it allows more people to save more for their retirement.
To deal with the impact of Coronavirus on the economy, a £30 billion fiscal stimulus is being put in place. The Chancellor stated that eventually supply chains will return to normal, and economic performance will recover. As for public health, the NHS has been promised as much money as it needs, whether this is “millions or billions.” From a business perspective, the government will refund the cost of providing Statutory Sick Pay for up to 14 days for employees. Additionally, £1.4 Billion will be invested in science institutes researching Coronavirus.
The Budget put in place a much bigger near-term fiscal stimulus than expected to counter the short-term economic effects of the coronavirus, but arguably the more important and longer-lasting theme is that the austerity of the last decade has been replaced with an attitude of spending that could last just as long.
Aside from Coronavirus, there were a range of other investments the Chancellor is making with the aim of boosting the UK economy. There will be £175 billion for infrastructure and industries. The Chancellor stated that the OBR has upped growth forecasts based on the packages announced. The GDP forecast without fully accounting for the impact of coronavirus would have led to growth of 1.1% in 2020 and 1.8% in 2021, then 1.5%, 1.3%, and 1.4% in the following years.
Elsewhere, there are tax cuts for businesses, alcohol duties are frozen, fuel duty is frozen, and there are plans to invest in broadband infrastructure and environmental issues. The Tampon Tax is to be scrapped.
At a glance, here’s some of the other key points that may help you to do more with your money:
- The Living Wage is set to rise by 6.2% to £10.50 by the middle of the decade.
- Entrepreneurs relief was widely rumoured to be getting scrapped, but Chancellor Sunak has opted to reduce it from £10 million to £1 million. The rate was first launched in 2008, it allows entrepreneurs a 10% cut in the capital gains tax they pay on the sale of their business.
- The Government will spend an extra £175 billion over the next five years. Sunak says the OBR estimates the extra government spending will increase long term productivity by 2.5% between now and 2025.
- National Insurance threshold to rise to £9,500 from April
- There is £5 Billion to be spent on getting gigabit-capable broadband into the hardest-to-reach places.
We will also be covering our reaction to the Budget in this week’s episode of our Do More With Your Money Podcast.
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