Budget 2020 – What it means for you

Rishi Sunak announced his first budget yesterday and there were many eyebrow raising financial aid packages and incentives designed to help the UK public navigate their way through a potentially unstable economic period.

The big news yesterday saw the the interest rate cut to just 0.25%. A reduction of 0.5%. A move temporariliy made to help bolster the UK economy experiencing cashflow problems during the next few months. This will aid businesses who have loan commitments as they should see a reduction in their monthly repayment figure once their lenders reduce their rates. Bearing in mind though that just because the Bank of England has announced a reduction in the rate, does not necessarily mean all banks/lenders will reduce their rate straightaway so keep an eye out on what action your lender takes.

The interest rate cut will not affect anyone locked into a fixed rate mortgage but it will help those out on a tracker/variable rate mortgage as the rate will adjust automatically in line with the base rate. For those with a fixed rate mortgage. If your term is ending soon, now would be an ideal time to remortgage using the new reduced rates and get yourself tied in to a lower rate.

For business owners, the chancellor announced that any business with a rateable value of lower than £51,000 will recieve a one year suspension of their rates bill. There will also be available a cash boost of £3000 for any business with a rateable value of lower than £15,000.

The national insurance threshold has been increased to £9500 meaning national insurance will not be incurred on any earnings below that figure. There was also a significant reduction in the entrepreneurs lifetime limit, from £10 million to £1 million. The corporation tax rate has stayed at 19% despite talks it would be reduced to 17% and no cuts have been made to the income tax rate or the VAT rate.

There is also help being made available to employees who have been advised to self isolate at home due to the corona virus. They will get paid from the first day off from work. Employers can reclaim the cost of their wages for up to two weeks from the government. For those not eligible for statuory sick pay, the ESA (Employment and Support Allowance) will be made available from day one of sickness rather than day eight.

Below is a a selection of the key policies that could affect you or your business.

To deal with the Coronavirus

1. All those advised to self-isolate will be entitled to statutory sick pay, even if they have not presented with symptoms
2. Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks
3. Small firms will be able to access “business interruption” loans of up to £1.2m
4. Business rates in England will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000

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Personal taxation, business and pensions

1. The tax threshold for National Insurance Contributions will rise from £8,632 to £9,500
2. The move, first announced in November, will take 500,000 employees out of the tax altogether
3. Those earning more than £9,500 will be, on average, £85 a year better off
4. 5% VAT on women’s sanitary products, known as the tampon tax, to be scrapped
5. No other new announcements on income tax, national insurance or VAT
6. Tax paid on the pensions of high earners, including NHS consultants, to be recalculated to address staffing issues

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Business and digital

1. System of High Street business rates to be reviewed later this year
2. Firms eligible for small business rates relief will get £3,000 cash grant
3. Entrepreneurs’ Relief will be retained, but lifetime allowance will be reduced from £10m to £1m
4. £5bn to be spent on getting gigabit-capable broadband into the hardest-to-reach places
5. Science Institute in Weybridge, Surrey to get a £1.4bn funding boost
6. An extra £900m for research into nuclear fusion, space and electric vehicles
7. VAT on digital publications, including newspapers, e-books and academic journals to be scrapped from December

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Alcohol, tobacco and fuel

1. Fuel duty to be frozen for the 10th consecutive year
2. Duties on spirits, beer, cider and wine to be frozen
3. Tobacco taxes will continue to rise by 2% above the rate of retail price inflation
4. This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars
5. Business rate discounts for pubs to rise from £1,000 to £5,000 this year

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The information provided on this web site is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from a professional accountant before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties. The information can only provide an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.