Over 2019, the UK somehow managed to survive without a budget. However, on the 11th March, Rishi Sunak, the Chancellor of the Exchequer, presented the first of two budgets due this year. The global coronavirus pandemic, however, has meant that the first UK Budget of 2020 is against a vastly different backdrop from what had been expected even a month before.
The UK Budget of 2020
As the first Budget of a new government, the first of a new decade and the first since the UK’s departure from the European Union, the UK Budget of 2020 is vitally important.
The UK Budget sets out a plan to support public services, individuals and businesses that have been affected by the outbreak of COVID-19. By carefully managing public finances, the government is able to support the economy in the short-term while investing in the future of the country.
Primarily an emergency budget, the government focused on providing a “temporary, timely and targeted” response to combat the global economic repercussions that have come alongside the coronavirus.
‘Crisis handling’ has remained important, which was underlined by a coordinated 0.5% cut in the Bank of England’s official bank rate a few hours before the announcement of the Budget. During this announcement, Mr Sunak declared the range of measures aimed at alleviating individual and business financial disruption during the coronavirus. This included business rate cuts and extensions to Statutory Sick Pay (SSP) for those isolating or for those caring for others who self-isolate, as well as support through the welfare system for those who cannot claim SSP.
The government has also pledged support for businesses that have experienced disruption to their cash flow through Business Rates reliefs and a Coronavirus Business Interruption Loan Scheme. These features of the Budget aim to support SMEs during the coronavirus crisis.
Away from the short-term, the Budget also announced investments into roads, railways and digital networks, features of the country that will underpin growth over the coming decade, as well as investments into hospitals, schools, colleges and police forces. The Budget also sets out an important plan to invest in both research and development and technology.
The Chancellor could not completely ignore the legislative backlog that had built up due to the earlier delay of the Budget. Alongside the £12 billion plan to provide support for public services, individuals and businesses, there were also a range of limited longer-term announcements:
Tapering pensions allowance charge
The rules for tapering the pension annual allowance charge for 2020/21 onwards have been eased. Key trigger limits, the threshold income and adjusted income have all been increased by £90,000. This means that, broadly speaking, if your total net income is not more than £200,000, your annual allowance will not be subject to the taper.
The lifetime allowance
The lifetime allowance, which is the other main pension allowance, has risen in line with inflation, making it £1,073,000 for 2020/2021.
Entrepreneurs relief lifetime limit
The lifetime limit for entrepreneurs’ relief has been reduced to £1,000,000 from £10,000,000, taking it back to its original level when the relief was originally introduced 12 years ago.
National Insurance Contributions (NICs)
The starting point for both employees’ and self-employed NICs will rise to £9,500, providing a NIC saving of around £104 a year.
The rate of corporation tax stays at 19%, instead of falling to 17% as previously planned. This has generated the largest source of additional tax revenue in the Budget.
Junior ISAs and Child Trust Fund
The contribution limit for Junior ISAs and Child Trust Funds have been more than doubled, up to £9,000 per tax year. Other ISA limits, however, have remained unchanged.
If you want to find out more about how the Budget will affect your finances, speak to one of our experienced independent financial advisers by calling 01926 492406 or emailing email@example.com.