Amid a turbulent economic backdrop following the biggest one-day fall in markets since the 2008 financial crisis, the COVID-19 pandemic and the surprise move by the Bank of England to cut interest rates by 0.5%, Chancellor Rishi Sunak has delivered the new government’s first Budget.
We look at the headline announcements and how your finances might be affected.
Measures to support the economy during the COVID-19 pandemic
Described as the key challenge facing the country today, the Chancellor warned that up a fifth of workers could be off sick at the height of the epidemic, causing temporary disruption to the economy. The government has promised a package of assistance worth more than £12bn for the NHS and businesses, including:
- The NHS being given any new resources it asks for to deal with the crisis
- Statutory Sick Pay (SSP) will be made available to all workers from day 1, including those who aren’t ill but have been asked to self-isolate
- Changes to the welfare system to help gig economy workers to claim Employment and Support Allowance more quickly
- A new £500m hardship fund for local authorities to provide support for those hardest hit
Temporary measures for businesses include a 100% business rates discount for the coming year for all leisure and hospitality businesses with a rateable value of less than £51,000 and a £5,000 business rates discount for pubs in England for a year.
The government has announced that the National Insurance threshold will increase to £9,500 from April this year, saving the average employee around £100 per year.
For those of us who enjoy a tipple, planned increases in beer, cider, wine and spirits duty have been cancelled for this year, marking the first time all alcohol duties have been frozen at once. Fuel duty will also be frozen again, for the 10th year in a row.
Tobacco duties are set to increase by RPI plus 2%, with rolling tobacco subject to an extra 6% increase from 11 March 2020.
In a boost to young savers, the amount that can be saved in a Junior ISA (JISA) or Child Trust Fund (CTF) is increasing from the current threshold of £4,368 to £9,000.
Despite rumours of its impending abolition, entrepreneur’s relief will be reformed with a reduction in the lifetime limit from £10m to £1m. It was also announced that the government would increase spending on R&D to £22bn, more than the US, China or Japan.
It is expceted that a new digital services tax will also come into effect on 1 April 2020, designed to collect 2% of online revenues made in the UK by large tech companies such as Google, Facebook and Amazon.
The affordable homes programme will be extended with £12bn of investment, helping to fund more affordable properties. The chancellor also allocated £1.1bn to build an additional 70,000 homes in areas of particular need across the country.
In an anticipated move, a Stamp Duty surcharge for non-UK residents buying UK property will be introduced at 2%, with the proceeds being used as new funding to completely abolish rough sleeping by 2024.
Interest rates on loans to Local Authorities will decrease by 1% to incentivise the building of more council houses.
The government has announced £600bn of investment over the next 5 years, with net public investment at its highest level in real terms since 1955. This funding includes ambitions to achieve nationwide gigabit broadband and an increase in 4g coverage to 95% by 2024.
The funding also covers the funding of HS2 and the first leg of northern powerhouse rail, as well as a new fund to tackle potholes and road resurfacing across England. A National Infrastructure Strategy will be published later in the year which will outline further where investment will continue to be made.
Further announcements can be expected in the Autumn Budget later in the year.