Chancellor Rishi Sunak has delivered his first Budget after just weeks in the job. We examine the main points.
Sunak announced a fiscal stimulus totalling £30 billion to combat the effects of the coronavirus. The figure includes extras resources for the NHS, support for workers off sick and financial support for businesses. The cash comes alongside the cut in the Bank of England base rate announced earlier in the day.
Statutory sick pay (SSP) will be available to employees self-isolating from day one of being off sick, rather than day four. Sick notes will be available by contacting NHS 111.
Two million businesses with less than 250 employees will receive £2 billion in sick pay rebates.
Anna Stupnytska, head of global macro at Fidelity International, says: “While it may indeed represent one of the ‘most comprehensive’ virus-response packages we have seen globally so far, at least on the headline, the high degree of uncertainty around coronavirus outcomes does make it difficult to gauge whether the new policy measures are going to be sufficient in averting a recession this year.”
The Chancellor stopped short of extending SSP to everyone. Self-employed workers and those in the gig economy will be given help via a £500m boost to the benefits system. Measures include a temporary halt to the minimum floor in Universal Credit and quicker payments for employment and support allowance (ESA) claimants.
Transport and infrastructure
More than £600 billion will be spent on roads, rail, broadband and housing by the middle of 2025. This includes £2.5 billion to fix potholes and resurface roads over the next five years.
There will be a new "economic campus" for the Government in the North of England with about 22,000 civil servants moving out of central London.
New tower block cladding fund
Sunak announced a new building safety fund worth £1 billion, aimed at removing dangerous cladding from buildings more than 18 metres tall following the Grenfell Tower fire.
A statement from the Birmingham Leaseholder Action Group said the money was a “welcome increase of the fund to remove unsafe cladding” but that the Government now needed to expedite the payments to affected buildings as well as reviewing policies for buildings under 18 metres and those with other fire safety issues, such as missing fire stops, which have been highlighted post-Grenfell.
Another negative is that Sunak offered nothing to help leaseholders unable to remortgage or sell their homes due to a lack of documentation showing their building is safe.
The controversial “Tampon tax” is to be scrapped, meaning women will no long pay 5% VAT on sanitary products because they classed as “luxury items”. The tax cut will save women 7p on a pack of 20 tampons and 5p on a pack of 12 sanitary pads.
Sunak also announced that fuel duty will be frozen for the 10th consecutive year while VAT will be scrapped on digital publications, including books and newspapers.
Duties on spirits, beer, cider and wine will be frozen.
Nik Antona, CAMRA chairman, says: “Against the backdrop of industry fears on coronavirus, it is good to see the Government has continued to recognise the value of pubs to the economy and society by freezing beer duty in the Budget. Brewers and pubs companies must now pass any savings on to consumers.”
The environment and energy
A plastic packaging tax will come into force from April 2022 to incentivise the use of recycled plastic in packaging and help tackle the scourge of plastic in the natural environment.
Rob Morgan, investment analyst at Charles Stanley Direct, says: “The Chancellor’s new plastic packaging tax is a step in the right direction towards encouraging people to alter their day-to-day behaviour towards socially responsible investing. Government intervention is key, as demonstrated by the plastic bag campaign where more than half (56%) say they are aware of it, and 15% say they have subsequently changed their behaviour as result.”
Fuel subsidies for off-road vehicles or “red diesel” will be scrapped for most sectors in two years’ time.
Communities affected by this winter's flooding will receive £120 million in emergency funding, plus £200 million for flood resilience.
The National Insurance Contributions (NICs) threshold will rise from £8,632 to £9,500, saving people just over £100 a year and effectively giving 31 million people a tax cut.
The Government says the move will mean about 1.1 million people will be taken out of paying Class 1 and Class 4 NICs entirely.
The threshold rise will take effect when the next tax year begins on 6 April 2020 and is the first step in meeting the Government’s ambition to increase the threshold to £12,500, which would save a typical employee more than £450 per year.
Pensions annual allowance
Sunak announced that the pensions taper annual allowance would be raised to ease workforce pressures on the NHS.
Currently, the standard tax-free annual allowance on pension contributions is £40,000, however this starts to taper down to £10,000 for those earning more than £110,000.
Sunak announced this figure will rise to £200,000. However, the minimum floor at which the annual allowance could fall to for higher earners will fall from £10,000 to £4000.
Moira O’Neill, head of personal finance at interactive investor, says: “Many doctors have been breaching the allowance by working overtime to cover NHS shortfalls, and have incurred tax charges. Others have been reducing their working hours or even deciding to retire early.
“However, according to the budget documents the move on the tapered annual allowance is not restricted to doctors. This is welcome as a two-tier pension system would have been unnecessarily complex and a dangerous precedent to set.”
Stamp duty for non-UK residents
The idea has been consulted on previously, so it was of little surprise to many that Sunak announced the introduction of a non-UK resident Stamp Duty Land Tax (SDLT) surcharge.
Anyone purchasing residential property in England, but not resident in the UK, will pay an extra 2% in stamp duty from 1 April 2021.
Rachael Griffin, tax and financial planning expert at Quilter, says: “This represents a crowd pleasing policy which will win over people worried that foreign house buyers are hoovering up UK property as an investment, only to leave it empty, which further exacerbates the housing crisis gripping the nation.
“While this surcharge introduction is welcomed, increasing the UK’s housing stock will have a more important impact for domestic buyers.”
Isa contribution limits
The amount parents can save into a Junior Isa or Child Trust Fund each year per child has been more than doubled, increasing from £4,368 to £9,000. The new limit will come into effect on 6 April 2020.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the move was “brilliant news”.
“We know families really value the opportunity to build a tax free nest egg for children to start their adult life,” says Coles, “By almost doubling the annual allowance, it gives them the chance to take advantage of the power of compounding growth, which will make a meaningful difference to their offspring at an incredibly expensive life stage.”
The Isa contribution limit for adults will remain at £20,000 for 2020/21.
Entrepreneurs' Relief lifetime limit cut to £1 million
Entrepreneurs' Relief is applied when a business owner sells or liquidates their business. It enables company founders selling their businesses to pay capital gains tax at a rate of 10%, as opposed to 20%, on gains up to £10m.
Sunak said the relief was “unfair” but resisted calls to scrap it entirely, instead opting to reduce it by £9 million to £1 million.
Access to cash legislation
The budget document confirmed that the Government will bring forward legislation to protect access to cash for those who need it. The legislation means that people who rely on cash will have guaranteed access to ATMs.
Natalie Ceeney of the Access to Cash Review said the announcement was “extremely welcome” and put the country on “the right track to maintain a viable cash system in the UK”.
Sunak announced an ambitious target for the National Living Wage (NLW) to reach two-thirds of median earnings and be extended to workers aged 21 and over by 2024.
Based on the latest Office of Budget Responsibility forecast, this means the NLW is expected to be more than £10.50 in 2024.
This builds on the 6.2% increase of the NLW to £8.72 an hour that takes effect from this April.
The Government said that since the NLW’s introduction in 2016 real wages have grown fastest for the lowest paid full-time workers.
The Government is investing a further £9.5 billion in the Affordable Homes Programme which in total will allocate £12.2 billion of grant funding from 2021-22 to support the creation of affordable homes across England.
Tom Slingsby, chief executive of property developer Southern Grove, says: “Only sufficient provision of affordable homes in the right areas can prevent the sort of social inconsistencies that appear when high property prices put key areas of UK cities off limits to younger workers and their families.
“We know from conversations we have constantly with housing associations that the appetite is there to keep building through economic cycles and this fund will ensure that will happen.”