Hot on the heels of the Bank of England rate cut announcement, the 2020 budget is the first budget delivered by Rishi Sunak under Boris Johnson’s government. Although there’s lots of information to digest, what you probably want to know is what the new budget means to you.
Before we explore the 2020 budget and what it means to your money, here’s what Raisin UK Co-Founder, Kevin Mountford, had to say about the Bank of England rate cut:
While no one can say for sure how savings accounts rates will change, it’s likely that interest rates will fall, meaning that locking in a fixed rate sooner rather than later could be beneficial.
Coronavirus, the NHS and welfare
The welfare sector and businesses will see an injection of £30 billion, of which £5 billion will go to the NHS, which will no doubt help the NHS to cope with Coronavirus. Statutory sick pay is being made available to individuals who self-isolate, and sick notes can be obtained by phoning the NHS using 111.
Those working in zero-hour contracts or a gig-economy role will also have better access to benefits, although it wasn’t made clear how much. Small businesses (250 employees or less) will also be able to claim sick pay rebates from a £2 billion pot.
An additional £1 billion is being set aside for welfare costs, including £500 million for local authorities to distribute under a hardship fund, and almost £650 million will be allocated to helping those sleeping rough to find accommodation.
Increased National Insurance threshold
Previously, earnings above £8,632 a year were subject to National Insurance contributions, but under the new system, this threshold will increase to £9,500.
The long abhorred 5% VAT charged on women’s sanitary products will finally be scrapped.
Infrastructure and housing
Infrastructure was a big focus of this budget, with Sunak claiming “if the country needs it, we will build it”.
Housing will receive a cash injection. Almost £1.1 billion to build nearly 70,000 new homes in areas where housing demands are high, and to prevent another Grenfell disaster, a £1 billion fund will be made available to remove cladding from tall residential buildings. Particularly of benefit to those living in areas that are subject to flooding, £5.2 billion will be invested in flood defences.
As an online savings service, we’re delighted that the internet infrastructure of Britain will receive a cash injection of £5 billion towards gigabit-capable broadband.
Transport and the environment
Although fuel duty will be frozen for another year, the tax relief afforded to red diesel will be abolished as funding for greener transport solutions increases by £1 billion. £27 billion has been pledged to create and maintain over 4,000 miles of roads.
Taxes on pollution will increase, as the government aims to charge £200 per tonne of packaging wherein less than 30% can be recycled by April 2020. Sunak also promised that 30,000 hectares of trees will be planted in a forest larger than Birmingham, and 35,000 hectares of peatland will be restored.
Support for businesses and entrepreneurs
£1 billion of lending will be made available to businesses through loans backed by the government, which will also back 80% of losses on bank lending. Retail business owners will be pleased to learn that business rates are being abolished for the remainder of the year, and any company that’s eligible for a small business rates relief can claim a cash grant of £3,000, which equates to £2 billion being set aside for 700,000 small businesses.
Tax relief for entrepreneurs will get an overhaul, reducing the lifetime limit from £10 million to £1 million. The justification for this decrease was that the £6 billion saving over the next five years could be invested in buildings, employment and other areas.
Cigarettes and alcohol
The planned rise in beer duty has been revoked, and the duty for wine and cider has been frozen, and business rate discounts for pubs will increase from £1,000 to £5,000. Tobacco taxes will continue to rise by 2%.