BUDGET 2020

Chancellor, Rishi Sunak, has delivered his first Budget in the House of Commons – detailing the government’s tax and spending plans for the year ahead.

Chancellor Sunak has barely been in one of the biggest jobs in the country for a month and has had to face an economic and social (Health and Welfare) scare and level of worry that must have been hugely challenging – understandably, he looked a little nervous at outset.

£30bn stimulus for the Economy

The Office for Budget Responsibility (OBR) view the 2020 Budget as the biggest sustained give away in 30 years.

Pulling out the huge cheque book for spending, against the backdrop of the coronavirus crisis and the move to Brexit changes the nature of the previous budgets and spending discipline.

Pensions

The Annual Allowance (AA) taper threshold is to be increased by £90,000 to £200,000.  This is important news for Senior Managers and business owners.  Click the link to read the article written by Amy Austin for the FT: https://www.ftadviser.com/pensions/2020/03/11/budget-2020-aa-taper-thresholds-hiked-by-90k/

Entrepreneur’s Relief – will be retained but the impact is substantial with the lifetime allowance reducing from £10m to £1m.

A summary of the 2020 Budget: Key points at a glance are as follows:-

Coronavirus

• £5bn emergency response fund to support the NHS and other public services
• Statutory sick pay will be paid to all those who are advised to self-isolate, even if they have not presented with symptoms
• Self-employed workers who are not eligible for sick pay will be able to claim contributory Employment Support Allowance
• The ESA benefit will be available from day one, not after a week as now
• £500m hardship fund for councils to help vulnerable people
• Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks
• Small firms will be able to access “business interruption” loans of up to £1.2m
• Business rates in England will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000.  Business rates in Scotland, Wales and Northern Ireland are set by the devolved administrations.

Personal Taxation, wages and pensions

• The tax threshold for National Insurance Contributions will rise from £8,632 to £9,500
• The move, first announced in November, will take 500,000 employees out of the tax altogether
• For those on salaries above £9,500, it will save them an average of £85 a year on average
• 5% VAT on women’s sanitary products, known as the tampon tax, to be scrapped
• No other new announcements on income tax, national insurance or VAT
• Tax paid on the pensions of high earners, including doctors, to be recalculated

Alcohol, tobacco and fuel

• Fuel duty to be frozen for the 10th consecutive year
• Duties on spirits, beer, cider and wine to be frozen
• Tobacco taxes will continue to rise by 2% above the rate of retail price inflation
• This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars
• Business rate discounts for pubs to rise from £1,000 to £5,000 this year

Business, digital and science

• System of High Street business rates to be reviewed later this year
• Firms eligible for small business rates relief will get £3,000 cash grant
• Entrepreneurs’ Relief will be retained, but lifetime allowance will be reduced from £10m to £1m
• £5bn to be spent on getting gigabit-capable broadband into the hardest-to-reach places
• Science Institute in Weybridge, Surrey to get a £1.4bn funding boost
• An extra £900m for research into nuclear fusion, space and electric vehicles.
• VAT on digital publications, including newspapers, books and academic journals to be scrapped from December

Environment and energy

• Plastic packaging tax to come into force from April 2022
• Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne
• Subsidies for fuel used in off-road vehicles – known as red diesel – will be scrapped “for most sectors” in two years’ time
• Red diesel subsidies will remain for farmers and rail operators
• £120m in emergency relief for communities affected by this winter’s flooding and £200m for flood resilience
• Total investment in flood defences to be doubled to £5.2bn over next five years
• £640m “nature for climate fund” to protect natural habitats, including 30,000 hectares of new trees

Transport, infrastructure and housing

• More than £600bn is set to be spent on roads, rail, broadband and housing by the middle of 2025
• There will be £27bn for motorways and other key roads, including new tunnel for the A303 near Stonehenge
• £2.5bn will be made available to fix potholes and resurface roads over five years
• Further education colleges will get £1.5bn in new investment in their buildings
• £650m package to tackle homelessness, providing an extra 6,000 places for rough sleepers
• Stamp duty surcharge for foreign buyers of UK properties to be levied at 2% from April 2021
• New £1bn fund to remove all unsafe combustible cladding from all public and private housing higher than 18 metres

Economy and public finances

• Economy predicted to grow by 1.1% this year, revised down from 1.4% a year ago
• The figure, which does not take into account the impact of coronavirus, would be the slowest growth since 2009
• Growth predicted to rebound to 1.8% in 2021-22, 1.5% in 2022-23 and 1.3% in 2023-24
• Inflation forecast of 1.4% this year, increasing to 1.8% in 2021-2022
• Government to borrow £14.6bn more this year than previously forecast, equivalent to 2.1% of GDP
• Total additional borrowing of £96.6bn forecast by 2023-2024 to pay for spending commitments
• Debt as a percentage of GDP forecast to be lower at end of current Parliament than now

Nations and Regions

• An extra £640m for Scotland, £360m for Wales, and £210m for Northern Ireland.
• Treasury’s Green Book rules to be reviewed to put regional prosperity at heart of spending decisions
• Treasury to open new offices in Wales and Scotland
• New civil service hub in the North of England, employing 750 staff

As further financial planning points and opportunities unfold we will update and inform you accordingly.

As always, if you have an ‘advice’ requirement, simply get in touch and we will do all we can to assist you.

Best Regards.

Richard, Sian and the Best Price FS Team