In his first Budget delivered on 11 March, Chancellor of the Exchequer Rishi Sunak unveiled the largest boost to public investment for several generations in a bid to shore up the economy and see the country through the coronavirus outbreak.
Emergency rate cut
A dramatic Budget Day began with the Bank of England announcing an emergency halfpoint reduction in its base rate amid growing concerns over the economic impact of COVID-19. This returned the rate to 0.25%,
its lowest ever level (on 19 March a further cut to 0.1% was announced). Later, Mr Sunak revealed updated GDP projections which, excluding the inevitable coronavirus impact, suggested the UK economy would grow
1.1% in 2020-21, down from the previously forecast 1.4%.
The Chancellor’s main change with regards to personal taxation was an increase in the National Insurance threshold to £9,500, which will save most workers around £100 annually from April. However, the personal
allowance at which people start paying income tax was frozen at £12,500, while the £50,000 higher-rate threshold also remains unchanged in parts of the UK where income tax is not devolved. As previously announced the new single-tier State Pension will rise
from £168.60 a week to £175.20 in April, while the older basic State Pension will increase from £129.20 to £134.25 per week.
In relation to savings, the major announcement was a hefty increase in the JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limit from £4,368 to £9,000 in the coming tax year. The ISA (Individual Savings Account) allowance, including the Lifetime ISA allowance if used, was left unchanged at £20,000. Another potential impact on savers concerns the reduced amount of money set to be raised via National Savings and Investments, which suggests rates at the government’s savings arm may become less competitive during the
KEY POINTS FROM THE SPRING BUDGET
• Economy predicted to grow by 1.1% in 2020-21, revised down from 1.4% forecast a year ago (this figure does not take into account the impact of COVID–19)
• Growth predicted to rebound to 1.8% in 2021–22, easing back to 1.5% in 2022–23
• Inflation forecast of 1.4% this year, increasing to 1.8% in 2021–2022
CORONAVIRUS AND PUBLIC SERVICES
• £5bn emergency response fund to support the NHS and other public
services in England
• All those advised to self-isolate will be entitled to Statutory Sick Pay, even if they have not presented with symptoms
• Self-employed workers who are not eligible will be able to claim contributory Employment and Support Allowance (available from day one)
• £500m hardship fund for councils in England to help the most vulnerable in their areas
• 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
• Business rates in England will be suspended for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000
• £6bn in extra NHS funding over five years to pay for staff recruitment and start of hospital upgrades
PERSONAL TAXATION, WAGES AND PENSIONS
• Tax paid on the pensions of high earners, including NHS consultants, to be recalculated to address staffing issues
• The two tapered Annual Allowance thresholds for pensions will each be
raised by £90,000
• The minimum level to which the Annual Allowance can taper down will reduce from £10,000 to £4,000 from April 2020
• Annual Capital Gains Tax exemption increased to £12,300 from 2020–21
• The Lifetime Allowance for pensions will increase in line with the Consumer Prices Index, to £1,073,100 for 2020–21
• From 11 March 2020 the Lifetime Allowance on gains eligible for Entrepreneurs’ Relief reduced from £10m to £1m.