11.03.2020 | 5 minutes estimated reading time | Print this article

Budget 2020: What does it all mean?

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:

It’s no surprise that the Bank of England has reacted to the current climate with today’s base rate cut, this spells bad news for millions of people that rely on income gained from cash as the industry moves to quickly reduce savings rates.

However, you could still improve the returns on your hard-earned cash if you explore options outside of your bank. Be vigilant, check your options and shop the market for the best rate available and move your money around.

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.

What does this mean?

Coronavirus appears to be front and centre of the governments’ current concerns, and they’ve allocated the budget accordingly. This is great news for anyone working in a job where taking a laptop to work from home isn’t an option.

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.

What does this mean?

In real terms, this threshold increase will put £100 back in the pockets of taxpayers.

Tampon tax

The long abhorred 5% VAT charged on women’s sanitary products will finally be scrapped.

What does this mean?

Hopefully, this will result in a drop in the cost of women’s sanitary products.

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.

What does this mean?

There will likely be an increase in the availability of new housing in areas where it’s needed, but hopefully, this won’t reduce the value of existing housing. For existing homeowners, the extra money spent on flood defences and the removal of cladding from buildings at risk might increase the value of their property.

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.

What does this mean?

Although the freeze on the fuel tax is a benefit, motorists might find that the money they save ends up paying towards pollution taxes, but there’s a clear benefit to improving the roads throughout the UK.

Addressing environmental concerns benefits everyone, especially the younger and future generations.

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.

What does this mean?

Although entrepreneurs might feel the pinch, small businesses should be better off, and retail businesses will no doubt welcome the tax break for the rest of the year. Hopefully, this will result in more stable jobs and a healthier high-street.

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%.

What does this mean?

The cost of drinks with friends shouldn’t go up too much for the rest of 2020, but the cost of cigarettes will continue to climb.