Many of the changes that the newly-appointed Chancellor of the Exchequer, Rishi Sunak, declared were in line with expectations, but the unique situation that Covid-19 presents meant there were some new, major policies introduced as well.
Here is our guide to help you understand what changes the Budget is bringing in, and how they may affect you.
What was the coronavirus response in the Budget?
The Budget contained some emergency policies to help individuals and businesses that may face challenges as a result of COVID-19.
Overall, to deal with the impact of the virus, the government has set £5 billion towards an emergency COVID-19 Response fund to support the NHS, local authorities, and other public services. Local authorities will have access to a Hardship Fund worth £500 million to help vulnerable households.
- Those in self-isolation or diagnosed with COVID-19 can now receive Statutory Sick Pay (SSP) from day 1, rather than day 4. They will not need the traditional fit note from their doctor to receive this.
- Self-employed workers, gig workers, and other individuals not eligible for SSP can claim Universal Credit or Contributory Employment and Support Allowance (ESA) instead, with plans in place to make it easier to receive these benefits. Minimum requirements for Universal Credit will be relaxed on a temporary basis. ESA claimants over 25 can receive £73.10 a week, with under-25s receiving £57.90.
- SMEs with fewer than 250 employees will be able to claim back any SSP they have had to pay because of absences related to COVID-19. It will cover up to two weeks of SSP per eligible employee.
- Businesses in the retail, hospitality, and leisure industries with a rateable value of £51,000 or lower won’t need to pay business rates for the coming year.
- Small businesses that receive Small Business Rates Relief or Rural Rates Relief may be eligible for a one-off £3,000 grant to help with ongoing costs.
- Pubs with a rateable value of up to £100,000 will also benefit from a rates discount of £5,000, an increase from the planned £1,000.
- A temporary “Coronavirus Business Interruption Loan Scheme” will launch, giving businesses access to loans of up to £1.2 million. The government will give lenders a guarantee of 80% on each loan, to encourage them to provide finance to small businesses.
- If COVID-19 has affected their tax affairs, businesses and the self-employed may be able to receive support from HMRC, on a case-by-case basis.
Since the Budget, the Chancellor has announced further changes to these business support measures, including increasing the value of grants on offer and extending the business rates holiday to all businesses in the retail, hospitality, and leisure sectors. Visit our guide to business interruption loans for more information on these updates.
How will the Budget affect businesses?
- In a change to expectations, Entrepreneurs’ Relief has remained in place. However, the Lifetime Allowance is reduced from £10 million to £1 million.
- Corporation tax remains at 19%.
- Employment Allowance will increase from £3,000 to £4,000, so eligible businesses will pay less in employers National Insurance Contributions.
- Changes to the IR35 rules, which determine the status of employees for tax purposes, will be extended to the private sector as planned from 6th April 2020.
- As described above, the business rates discount is being increased and extended for this year.
- Further review of high street business rates will happen later on in 2020.
For more information on businesses and the high street, read our ‘The Future of the High Street’ guide, where we use exclusive data to discuss whether the high street is dying or simply evolving.
How will the Budget impact my hourly pay and tax?
- National Living Wage for those aged 25 and over will rise from £8.21 to £8.72 an hour, with the minimum wage for younger workers also increasing.
- The tax threshold for National Insurance Contributions is raised from £8,632 to £9,500. This means around 500,000 will no longer pay this tax and, on average, those earning more than £9,500 will save around £85 a year.
How will the Budget affect my personal finances?
- VAT on sanitary products- the so-called tampon tax- will be abolished.
- VAT on digital publications, including ebooks and online newspapers, will be scrapped from December 2020.
- The tax-free allowance for Junior ISAs and Child Trust Funds is increasing from £4,368 to £9,000 in April 2020.
- Working age benefits will rise by 1.7%, in line with the rising cost of living.
- The full, new State Pension is increasing by 3.9% to £175.20 from April 2020. The older basic state pension is also increasing by 3.9% to £134.25.
How will the Budget impact alcohol, fuel, and tobacco?
- Fuel duty is frozen for the coming year.
- Alcohol duty on spirits, beer, cider, and wine will also be frozen this year.
- Tobacco taxes will rise by 2% above the rate of retail price inflation (RPI).
What transport and infrastructure changes were announced in the Budget?
- £27 billion is set aside to improve motorways and other major roads.
- £2.5 billion is available to resurface roads and fix potholes over the next five years.
- £5 billion will be spent on extending gigabit broadband across the UK, particularly the hardest-to-reach, rural areas.
- Up to £400 million extra funding will go towards research, infrastructure, and equipment in 2020-21.
- £900 million will be invested in high-potential technologies, including nuclear fusion, electric vehicles, and space research.
What housing changes were announced in the Budget?
- Foreign buyers of UK properties will face a Stamp Duty surcharge of 2% from April 2021.
- £12.2 billion will go towards the Affordable Homes Programme in 2020-21.
- Provision of £1 billion to remove all unsafe and combustible cladding from public and private housing over 18 metres tall.
- £650 million is made available to tackle the problem of homelessness.
For more information on homelessness, read our ‘The True Cost of Homelessness’ guide.
What environmental measures did the Budget announce?
- A tax on plastic packaging will be introduced from April 2022.
- Companies with products that are packaged with less than 30% of recyclable material will be charged £200 per tonne.
- Red diesel- fuel subsidies for off-road vehicles- will be abolished for most sectors from April 2022. Farmers and rail operators will continue to receive the subsidies.
- Introduction of a £640 million “nature for climate fund” to look after natural habitats, including investment in tree planting and peatland restoration.
- £500 million will be available over the next five years for the roll-out of a fast-charging network for electric vehicles.
- The Plug-in Car Grant is extended to 2022-23, with £403 million allocated for this.
- £200 million is allocated to help communities in flood-risk areas build defences, improve their resilience, and recover from damage. Total investment in flood defences is set to increase to £5.2 billion between 2021 and 2027.