Budget 2020: what does it mean for you and your finances?
The UK’s 2020 budget was delivered on Wednesday (March 11th) as fear levels continue to rise surrounding the coronavirus pandemic.
Delivered by Rishi Sunak in his first speech as Chancellor of the Exchequer, the budget focused on supporting business and the economy, with significant announcements regarding benefits and tax.
But what does this mean for you and, more importantly, your money?
Here we dive into the key points surrounding personal finances and how they can affect your hard-earned cash.
Mr Sunak’s main focus in the budget surrounded the ongoing growth of the coronavirus pandemic.
He announced a £5bn emergency response fund to “ensure the NHS and other public services receive the funding they need to respond to the outbreak as the situation develops and recover and return to normal afterwards.”
For those worried about their finances should they need to self-isolate, the Chancellor promised that everyone will be entitled to Statutory Sick Pay (SSP) from day one, even if they have shown no symptoms.
Those who are self-employed, who won’t be eligible for SSP, will instead be entitled to Employment Support Allowance (ESA) – which will also be from day one.
The budget also revealed the threshold for National Insurance (NI) will rise in April.
At present, workers and the self-employed being making NI contributions once they earn an annual salary of £8,632. This will now rise to £9,500, meaning over half a million people will no longer have to pay this tax.
The Chancellor stated it will also allow those still paying to save an average of up to £85 per year.Get debt advice today
High earners will now be able to pay more into their pension.
The income threshold that reduces the amount high earners can pay towards a pension will rise from £110,000 to £200,000. This means from next month anyone with an income of less than £200,000 will not be affected by the tapered annual pension allowance – the maximum amount of pension savings you can accrue in a year.
The budget also announced that it will increase the lifetime allowance – which is the total amount you can withdraw from your pension before being charged extra tax. It will rise in line with the Consumer Price Index (CPI) to £1,073,100.
It’s also worth noting that from April, the state pension will increase from £168.80 per week to £175.20, with those on the older basic model will see it increase from £129.20 to £134.25. However, this was announced beforehand.
There weren’t many changes announced on the savings front, with the cap on tax-free savings remaining at £5,000 and the tax-friendly cap on ISAs remaining at £20,000.
However, there will be a significant increase in the amount you can put into a junior ISA per year. The 2020-21 tax year will see this more than double by rising from £4,368 to £9,000.
Following the Scottish Budget earlier in the year, it was confirmed the freeze on welfare benefits such as Jobseeker’s Allowance, Employment and Support allowance, Child Benefit and some forms of Housing Benefit, will end.
These working-age benefits will increase in line with the rising cost of living, meaning it will rise by 1.7% in the new tax year.
The government will also continue to roll out Universal Credit to help “support the most vulnerable in society, with extra help for parents of sick or premature babies, carers and victims of domestic violence.”
Furthermore, the government has promised to help those who claim universal credit “repay debts in a more sustainable and manageable way”. This will be done by reducing the maximum rate at which deductions can be made from a universal credit award from 30% to 25% of the standard allowance and giving claimants up to two years to pay back advances.
Whilst the budget had a lot of focus on governmental debt, there was a shining spot on those suffering with problem debt.
The budget stated: “The government will invest an additional £12.5 million in HMRC in 2020-21 to begin work immediately on the implementation of breathing space.
“From early 2021 this will mean that those in problem debt can access a 60-day breathing space, including for debts to HMRC, while they engage with debt advice and work towards a sustainable debt solution.”
This will allow thousands of people across the country time to find a way to solve their debt problems, without the hassle from those they owe money to. The breathing space period will also freeze interest, fees and stop enforcement action.