On 11 March 2020, the Chancellor of the Exchequer, Rishi Sunak, delivered his first Budget in the House of Commons.
Just before the Budget announcement, Mark Carney from the Bank of England announced a reduction in UK interest rates from 0.75% to a historic low of 0.25%, and the Treasury pledged more than £600 billion for infrastructure projects over the next five years.
In his Budget speech, Mr Sunak provided an update on Britain’s economic growth as a response to the OBR’s forecasts on public finances and, as predicted, addressed concerns over the coronavirus outbreak and its impact on the economy.
Here is what was announced in the UK Budget 2020:
The Budget at a glance
- Reduction in UK interest rates from 0.75% to a historic low of 0.25%
- More than £600 billion for infrastructure projects pledged
- £5 billion emergency response fund in place for NHS to tackle coronavirus
- SSP will be paid to all those who choose to self-isolate
- The cost of providing SSP for up to 14 days will be refunded in full by the Government for businesses with fewer than 250 employees
- Economy predicted to grow 1.1% this year
- National Insurance Contributions tax threshold to increase from £8,632 to £9,500
- “Reading tax” on e-publications abolished from December 2020
- “Tampon tax” on women’s sanitary products abolished from January 2021
- Business rates abolished for some firms with a rateable value below £51,000 this year
- Employment Allowance to increase from £3,000 to £4,000
- £2.2 billion funding pledged to support small businesses
- Corporation Tax to remain at 19%
- Duties on fuel, ciders, wines, spirits and beers frozen for year ahead
- Affordable Homes Programme extended
- Plastic Packaging Tax introduced from April 2022 to combat plastic pollution
- £500 million to support the rollout of new rapid charging hubs
Coronavirus response
Acknowledging its impact on business productivity levels, the Chancellor began his speech by announcing his plan to tackle coronavirus. Firstly, he pledged extra resources for the NHS – with a £5 billion emergency response fund in place to support public services. A £500 million hardship fund was also announced to help vulnerable people.
He also addressed changes to Statutory Sick Pay, following on from the Prime Minister’s announcement last week that it will be paid from day one and not day four. SSP will be paid to all those who choose to self-isolate, even if they don’t have any symptoms. Rather than requiring a sick note from a doctor, those in self-isolation will be able to get a sick note by calling 111. Plus, those on employment contributory Support Allowance can claim from day one rather than after a week.
To ease the burden on small businesses, the cost of providing SSP for up to 14 days will be refunded in full by the Government for businesses with fewer than 250 employees.
Economy update
Without coronavirus being taken into account, the Office for Budget Responsibility (OBR) predicted the economy to grow 1.1% this year – although this has been downgraded from an initial prediction of 1.4%. GDP growth is expected to increase to 1.8% in 2021, reaching 1.4% in 2024. However, it’s likely that coronavirus will have a substantial adverse effect on the economy and public finances this year.
Personal tax and wages
Mr Sunak announced that the National Insurance Contributions tax threshold will be increased from £8,632 to £9,500 in the 2020/21 tax year, which will save people an average of £104 next year.
According to the Chancellor, these changes, along with the changes to the National Living Wage (which is projected to be over £10.59 an hour by 2024) and income tax, means that “someone working full-time on the minimum wage will be more than £5,200 better off than in 2010”.
The so-called “reading tax” has also been abolished, as the Government will apply a zero rate of VAT to e-publications from 1 December 2020. Plus, from January 2021, there will be no VAT on women’s sanitary products, which was dubbed the “tampon tax”.
Business
To help mitigate the impact of coronavirus on UK businesses, the Chancellor also revealed that the Government will be abolishing business rates for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000 this year. This will also include museums, art galleries, B&Bs, sports clubs and guest houses.
The Government will also increase the Employment Allowance from £3,000 to £4,000 as of this month, which is set to benefit around 510,000 businesses by reducing their costs of employment.
However, the lifetime allowance of Entrepreneurs’ Relief will be reduced from £10 million to £1 million.
Mr Sunak pledged £2.2 billion of funding to support small businesses, by providing a £3,000 grant for any firm that is eligible for the Small Business Rates Relief (SBRR). He has also announced that £5 billion has been allocated to get gigabit-capable broadband into remote areas.
He also confirmed that Corporation Tax will remain at 19% for the year ahead, which remains the lowest in the G20.
Fuel and alcohol duties
For the tenth consecutive year, fuel duty is to be frozen. Plus, there’s welcome news that business rate discounts for pubs will rise from £1,000 to £5,000 this year.
To celebrate these savings, the Chancellor announced that duties on ciders, wines, spirits and beer is to be frozen for another year.
Housing
The Government has committed to extending the Affordable Homes Programme by investing a further £9.5 billion. This takes the total funding to £12.2 billion, which will be used to support the build of new affordable homes.
To combat homelessness, Mr Sunak announced that £650 million – raised through a new 2% stamp duty surcharge on non-UK nationals from April 2021 – will be put towards housing rough sleepers.
Health and the environment
While coronavirus dominated the Budget announcement, the Chancellor also shared new measures focused on improving the environment and reducing plastic pollution. This includes the introduction of a new Plastic Packaging Tax to tackle plastic waste, coming into force from April 2022. Manufacturers and importers will be charged £200 per tonne for packaging made from less than 30% recycled plastic.
With the growing popularity of EVs for personal and business use, £500 million has been pledged to support the rollout of new rapid charging hubs, to ensure that drivers are never more than 30 miles away from a charger.
An emergency relief of £120 million has been announced for communities affected by flooding, along with £200 million for flood resilience.
Lastly, £2.5 billion has been made available to fix potholes and resurface roads.
2020 Spring Budget in brief
It has been a year since the latest financial update from the previous Chancellor of the Exchequer, which delivered at a time when Brexit was the primary focus. This time round, it was coronavirus that became the leading concern to be addressed. With its economic repercussions not yet known, the threat of coronavirus has resulted in the Chancellor announcing the “largest Budget giveaway since 1992”, as he promises “stability and security” for the UK to prosper in the “challenging times” ahead.
View official Budget documents
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