2020 Budget – What You Need To Know

 
Published: 13th March 2020
 
Newly-appointed Chancellor of the Exchequer, Rishi Sunak, delivered the 2020 Budget on March 11th, unveiling the Government’s tax and spending plans for the coming year.

 
Chancellor delivers budget 2020

Photo:  Chancellor Rishi Sunak delivers the budget – Metro

 
Inevitably, the focus was on protecting the UK from the impact of coronavirus,  supporting the public health response, businesses and the economy. The Budget also covered changes to National Insurance, VAT cuts, spending on infrastructure and public services.
 
Find out what the Budget announcements mean for you.
 

 

Key Points at a Glance

 
Coronavirus – the pandemic has dominated the Budget, with emergency measures to cover NHS funding, sick pay and benefits, local council assistance and support for small businesses.

Public services – high levels of investment in NHS, transport and infrastructure, including reducing the north/south divide.

Environment – announcements on flooding, plastics and electric cars.

Housing – more affordable homes; commitment to tackle homelessness.

Tax cuts – National Insurance Contributions threshold raised and VAT cuts.

Low earners – minimum wages increased.

 

 

Coronavirus (COVID-19) Measures

 
The Government has pledged a £30bn ‘emergency package’ of measures to support individuals, businesses and public services:
 

Extra NHS funding

The Chancellor has promised to give the NHS whatever it needs to cope with the virus, ‘whether that’s millions or billions of pounds’.

 

Extension of sick pay & benefits

A quicker, easier system for those affected by coronavirus to access help (also to discourage people from going into work when they should be self-isolating):
 

  • People who are self-isolating, even if they are not showing symptoms, will be entitled to statutory sick pay immediately, from their first day off work.
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  • Those who are not eligible for sick pay, including self-employed workers, can claim Employment and Support Allowance (ESA) from day one (not after a week as previous rules).
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  • You will also be able to get a sick note over the phone – Call 111 (NHS service).
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  • Changes to Universal Credit benefit will ease the pressure on hard-up families, such as the removal of the ‘minimum income floor’ (MIF), meaning claimants may now get money to compensate for lost earnings if they are affected by coronavirus. People will be able to access advance payments and claim online rather than having to attend a Job Centre.

 

Support for small businesses

The Bank of England interest rate cut and budget measures aim to alleviate the impact of coronavirus on small businesses, to help protect jobs.
 

  • SMEs (firms with fewer than 250 staff) will be refunded for sick pay payments for 2 weeks.
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  • They will be also be offered government-backed loans to cover losses and help with cashflow problems.
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  • The Government is launching a major review of High Street business rates. In the meantime, small firms in retail, leisure and hospitality (including shops, cinemas, restaurants and hotels) will pay no business rates at all in the 2020-21 tax year, while others may be eligible for cash grants. Business rate discount for pubs has also been increased significantly.

 

Local assistance

Local councils will have access to a £500m hardship fund to help vulnerable people in their areas.

 

Find out more:

Coronavirus – what it means for you – Money Advice Service

GOV.UK Fact Sheet – Support for those affected by Covid-19

 
 
 

Public Services

 

NHS

In addition to funding for coronavirus, the NHS will receive an extra £6bn over 5 years, to help fund the recruitment of 50,000 nurses, 40 hospital upgrade projects and 50m more GP surgery appointments.

 

Transport & infrastructure

Investment in the UK’s transport and infrastructure will be at the highest levels for 50 years.  Plans cover roads, railways, broadband and research and ‘levelling up’ the regions (i.e. reducing economic inequality and generally improving life for those outside London and other major cities).
 

  • .Funding boost for public services in Scotland, Wales and Northern Ireland.
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  • Moving some government staff outside London, including Treasury offices in Wales and Scotland and creation of a civil service hub in the North of England.
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  • £400m R&D funding for universities, mostly outside the south east of England.
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  • Investment in road networks includes a new fund to tackle potholes!
  •  Man with mobile phone and backpack wb

  • Broadband and 4G coverage to be rolled out across the country.

 

Education

There will be spending on upgrading Further Education colleges, improving STEM provision, and funding arts and sport in schools.

 
 
 

Environment

 

  • The government will double spending on flood defences over the next 5 years to £5.2bn and allocate money to communities affected by this winter’s flooding to facilitate faster recovery.
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  • The plastics tax will come into force from April 2022, to tackle the ‘scourge’ of plastic in the environment and boost the use of recycled plastics by 40%.  Tax will be charged on the manufacture and import of plastic packaging that contains less than 30% recycled materials.
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  • . A ‘Nature for Climate Fund’ has been set up to protect natural habitats; projects include tree planting (more than 40 million trees) and restoring peatland.
  •  Graduate car

  • Electric cars – Discounts to encourage people to buy green cars will be extended to the 2022-23 tax year, and there will be investment to roll out super-fast electric vehicle charging points around the country, with the aim that no driver will ever be more than 30 miles from a rapid charging station.

 
 
 

Housing

 

  • £12.2 billion investment to build 200,000 new affordable homes.
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  • A new £1bn ‘Grenfell’ safety fund to remove combustible cladding from all tall residential buildings.
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  • £650m package to tackle homelessness, helping to move rough sleepers into accommodation.
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  • Non-UK residents buying property will be charged an extra 2% stamp duty, from April 2021. (England and Northern Ireland).

 
 
 

Tax Changes

 

National Insurance Threshold raised

From April, employees and self-employed workers will pay National Insurance Contributions (NIC) on earnings over £9,500 (rather than £8,632 at the moment). The IFS (Institute for Fiscal Studies) say this will save the average worker £85 a year, and estimate that 500,000 people will no longer have to pay any NIC.
Example: If you earn £25,000, you pay £1,964 NICs under the current rules. The new threshold means you would pay £1,860, saving about £100.

 

VAT cuts

  • The ‘Tampon tax‘ will be scrapped. 5% VAT charged on women’s sanitary products will be abolished (from January 2021).
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  • From December, there will be no more VAT on digital books, newspapers and magazines, bringing e-publications into line with their paper versions.

 

Fuel, alcohol, and tobacco duty

  • Fuel duty has been frozen (for the 10th year).
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  • Duty on beer, wine, cider and spirits will be frozen, but tobacco taxes continue to rise by inflation (RPI) + 2%, which will add about 27p to a pack of 20 cigarettes.

 
 
 

Low Earners

 
The National Living Wage will rise from £8.21 to £8.72/hour from April. The increase is more than 4 times the rate of inflation and will mean a pay rise of £930 per year for a typical full-time worker.

 

 

What is the National Living Wage?

The lowest wage that can legally be paid to employees aged 25+.
It is reviewed annually and is supposed to reflect the amount someone needs to earn to cover the basic costs of living and lead a decent life.
 

 
 
The National Minimum Wage (paid to Under 25’s) also goes up:

21-24 year olds 18-20 year olds 16 & 17 year olds Apprentices
£8.20/ hour £6.45/ hour £4.55/ hour £4.15/ hour

Source: GOV.UK

Check here to see if you’re earning the legal minimum, or if you’re owed payments from past years.
 
Note most interns should be paid at least the minimum wage, whatever the length of your internship. If there are any problems, you should take it up with your employer in the first instance, and if it remains unresolved, get advice from Acas, or report it to HMRC, who will investigate.

 

 

Business Owners

 

  • In addition to the measures relating to coronavirus, the Government has introduced a new package of start-up loans and export loans to support entrepreneurs and new businesses.
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  • Entrepreneurs’ relief will be reduced. This is a tax break that allows company owners to pay less capital gains tax when selling their business. It has been criticised for benefiting wealthy owners rather than encouraging investment in business. The lifetime allowance will now be reduced from £10m to £1m; the additional funds raised will go to business tax relief for investment in buildings, employment and R&D.

 

 

The UK Economy

 

  • Economic growth is predicted at 1.1% in 2020, revised down from 1.4% a year ago. This would be the slowest growth rate since 2009 and does not take into account the economic impact of coronavirus.
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  • Inflation is forecast at 1.4%, increasing to 1.8% in 2021-2022.
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  • Borrowing – The Government will have to borrow considerably more (an extra £14.6bn) than forecast this year to cover the significant new public spending plans.

 
 
 

How Will the 2020 Budget Affect You?

 
Use this calculator to find out the impact on your pocket from the new Budget measures:

Budget calculator 2020 – The Guardian
 
 
 
Sources:

BBC News – Budget 2020: What it means for you

BBC News – Summary of Budget 2020: Key points at-a-glance

GOV.UK – Budget 2020: What you need to know

The Guardian – Key points from budget 2020 – at a glance

Which? – Budget 2020: what you need to know

Budget 2020 round-up: NI threshold raised, fuel duty frozen and more
 
 
 

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