17 Mar Spring Budget 2020 summary
Rishi Sunak delivered his first Budget on 11 March 2020. Here’s a summary of the proposed changes;
Pensions
Annual allowance – The annual allowance remains at £40,000 for 2020/21.
Lifetime allowance – The lifetime allowance for pensions will increase from £1,055,000 to £1,073,100 for 2020/21.
Money purchase annual allowance – The money purchase annual allowance remains at £4,000 for 2020/21.
Tapered annual allowance – Threshold income is increasing from £110,000 to £200,000 and adjusted income from £150,000 to £240,000 for 2020/21.
This means that the taper will only affect individuals whose income excluding pension contributions is more than £200,000, and whose income including pension contributions exceeds £240,000.
The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000. This means that all those with adjusted income of £312,000 or over will have an annual allowance of £4,000.
Pension Tax Relief – Members of occupational pension schemes which use the net pay arrangement don’t benefit from tax relief on their pension contributions if they earn less than the personal allowance. They may benefit from a top-up to their pension contributions to bring them in line with those contributing to personal pensions through the relief at source method.
NHS Proposals – The proposals to offer greater pay instead of pension accrual for higher paid NHS clinicians, will not be taken forward.
- The new TAA of £4,000 will only affect those whose total Adjusted Income is in excess of £300,000
ISAs
The adult ISA annual subscription limit for 2020/21 will remain unchanged at £20,000.
The junior ISA annual subscription limit for 2020/21 will be uprated from £4,368 to £9,000.
The lifetime allowance ISA limit will remain unchanged at £4,000.
Taxation
The personal allowance (the amount you earn before you have to start paying income tax) will remain at £12,500. For non-Scottish tax-payers, the amount people will have to earn before they pay tax at 40% will remain at £50,000.
Starting rate for savings tax band – The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2020/21
National Insurance Contributions tax threshold to rise from £8,632 to £9,500 – saving people just over £100 a year.
Business Tax/Employer NICs • Increasing the Employment Allowance – The government will increase the Employment Allowance from £3,000 to £4,000 from April 2020. This will benefit around 510,000 businesses by reducing their costs of employment, with an average gain of £850 per year. •
Coronavirus response • NHS will receive the full financial support they need. • £5bn emergency response fund to support the NHS and other public services • Statutory sick pay will be paid to all those who choose to self-isolate, even if they don’t have symptoms • Contributory employment Support Allowance benefit claimants will be able to claim sick pay on day one, not after a week • £500m hardship fund to help vulnerable people • Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks • Small firms will be able to access “business interruption” loans of up to £1.2m • Business rates will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000
Alcohol, tobacco and fuel • Fuel duty for be frozen for the 10th consecutive year • Duties on spirits, beer, cider and wine to be frozen • Business rate discounts for pubs to rise from £1,000 to £5,000 this year
Entrepreneurs’ Relief will be retained, but lifetime allowance will be reduced from £10m to £1m (from today) •
The state of the economy • Economy predicted to grow 1.1% this year, not taking into account the impact of coronavirus • Annual output forecast to be 1.8% in 2021/22, 1.5% in 2022/23 and 1.3% in 2023/24 •
Inflation forecast of 1.4% this year, increasing to 1.8% in 2021/2022
Environment and energy • Plastic packaging tax to come into force from April 2022 • Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne •
- £120m in emergency relief for communities affected by this winter’s flooding and £200m for flood resilience • Total investment in flood defences to be doubled to £5.2bn over next five years • £640m “nature for climate fund” to protect natural habitats, including 30,000 hectares of new trees
Transport, infrastructure and housing • More than £600bn is set to be spent on roads, rail, broadband and housing by the middle of 2025 • Ministers say this represents the largest capital investment in infrastructure for generations • £5bn on broad band investment • £2.5bn will be made available to fix potholes and resurface roads over five years