Budget 2020: ‘Getting it done’
Today was the first budget for the new government and the first for the new Chancellor, Rishi Sunak. Rishi has only been in the job for four weeks, but today he was confident and engaging as he presented a budget where each point was summed up with the new slogan; this government is ‘getting it done’, much to the applause from his colleagues.
Arguably the headline announcement was a £30bn package to help the economy through the Coronavirus outbreak. But this was swiftly followed by a spending spree to build new infrastructure, support for research and development around the country, and a series of announcements on the environment and energy.
In summary, this budget had no shocks in it and delivered what was promised in the manifesto in December, in addition to the special measures for Coronavirus.
That said, we’ve outlined the key take-homes below…
“We’ll get through this together”… Rishi warned of significant, but temporary disruption to the UK economy. He unveiled a £30bn package to boost the economy and get the country through the coronavirus outbreak. Of this, £12bn is specifically targeted at coronavirus, with at least £5bn going to support the NHS in England.
No changes to pension income tax… There had been rumours that we might see reductions to pension tax relief for higher earners. It was always unlikely with coronavirus taking the headlines and indeed no changes came, although there were changes to the tapered annual allowance for high earners…
Pension tapered allowance updates… Currently, individuals who earn over £110,000 see the amount they are allowed to save into pensions each year gradually reduce from £40,000 to £10,000. The budget announced a shake up here, with the threshold raised to £200,00 which will benefit many, however those earning above this will now see the allowance reduce down to a lesser £4,000.
Income tax bands stay the same… No changes to income tax bands in this budget, with the personal allowance remaining at £12,500 and higher/additional rate bands staying at £50,000 and £150,000.
Another tax band makes gains… One rarely used, but incredibly valuable allowance if utilised correctly - the capital gains tax allowance - is set to increase from £12,000 a year to £12,300 a year. This will be a nice win for investors.
Good news for children’s savings… Whilst the ISA allowance for individuals has been kept at £20,000, the limit for Junior ISAs has been increased from £4,368 to £9,000 for the 2020/21 tax year, which will be a welcome boost for parents saving for their children.
Entrepreneurs’ relief remains… There was a lot of talk that entrepreneurs’ relief would be scrapped in this budget and this was in the government’s manifesto. This relief gives business owners a reduced rate of capital gains tax when they go to sell their business (10%). Instead of scrapping the relief, the lifetime limit has been reduced from £10m to £1m. The government was keen to continue encouraging small business owners and this reduction is still expected to cover over 80% of those who use it.
And finally, a night cap… You’ll be pleased to know he froze duty on fuel, scotch whisky, beer and wine!
Those are the key talking points from today’s budget - nothing drastic for most people's finances, although some significant changes for pension savers.
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