As Europe faces its greatest public health challenge in recent history, Chancellor Rishi Sunak released his first Budget.
As you would expect, much of the Budget focused on mitigating the effects of the coronavirus outbreak. However, there were several important measures released alongside the headline grabbing coronavirus controls. Of £30 billion in extra spending, £12 billion will be specifically targeted at the outbreak.
Coronavirus and public services
All those advised to self-isolate are to receive statutory sick pay if eligible. This will be paid from the first day off work, not the fourth. This sick pay is paid by the employer but businesses with fewer than 250 employees can reclaim the cost of paying sick pay for the isolation period.
Self-employed workers who do not get sick pay will be able to claim Employment and Support Allowance from day one of a period taken off work rather than day eight.
The Chancellor also set aside £500 million as a hardship fund to help local councils support vulnerable people during the outbreak.
Cuts to entrepreneurs’ relief
Tax breaks available to those selling their businesses have been capped to £1 million over a lifetime. This relief, which formerly stood at £10 million, allows business owners of two years or more to pay less capital gains tax when they sell – 10% rather than 20%. The move is expected to save the Treasury £6 billion over the next five years.
The Chancellor said that these extra earnings will be channelled into raising the R&D expenditure credit from 12% to 13% and a rise of employment allowance by a third to £4,000.
A freeze in income tax thresholds
The Budget confirmed that, from April, the amount earned before paying 20% tax will be frozen at £12,500, and £50,000 will remain the threshold at which people start to pay the higher 40% rate of tax. This means that anyone who gets a pay rise in the coming year is likely to pay more tax as extra wages push them over these thresholds.
Of course, if you are a Scottish taxpayer, you have different rates to the rest of the UK. These were announced in the recent Scottish Budget.
Increase in tax-free savings for children
The Chancellor announced an increase in the allowances for Junior ISAs and Child Trust Funds. Both will rise from £4,368 to £9,000 in April. Money locked away in these tax-free savings accounts is kept until a child’s 18th birthday when it is converted into a standard ISA which the child can spend as they want.
Changes to pension taxes for higher earners
The notoriously complicated system for higher earners’ pension taxes is set to change.
Two key thresholds at which tax thresholds kick in for higher earners are set to change. The level at which a saver’s annual allowance starts ‘tapering’ down from £40,000 to £10,000 will rise from £110,000 to £200,000. However, under the new rules, the minimum annual allowance (formerly £10,000) will continue to fall for those who earn more than £300,000. In short, the new rules are less favourable to extremely high earners but more favourable for those who earn between £110,000 and £200,000.