Sajid Javid has resigned as chancellor of the exchequer with less than a month to go until Budget day. His replacement, Rishi Sunak, has just a few weeks to prepare to deliver the Budget on 11 March 2020. But what will be announced, and how will it affect your finances?
Sajid Javid reportedly stood down when the prime minister ordered him to sack his advisers and create one advisory group for Number 10 and Number 11. Johnson might suspect the fresh-faced Sunak to find this plan more agreeable.
As far as we know, the new Conservative majority government will still hold its first Budget on Wednesday, 11 March. It is set to be the UK’s first Budget as a non-EU state in more than four decades – and rumours and speculation over what it will include are rife.
After a dramatic last-minute reshuffle, the new chancellor will step up to the dispatch box less than a month after taking the post.
Here, Which? takes a closer look at who the new chancellor is and what the Budget predictions that could impact your personal finances that were circulating before he took the post.
Who is Rishi Sunak?
Sunak was elected MP for Richmond (Yorks) in 2015.
His rapid rise up the ranks saw him appointed chief secretary to the Treasury when Johnson became prime minister in July 2019, and now chancellor of the exchequer just six months later. He was the under-secretary of state for local government before that.
Sunak is far less experienced than his predecessor. Though he had the right to attend cabinet meetings, as chief Treasury secretary he was not technically a full cabinet minister.
In contrast, Sajid Javid served as culture secretary, business secretary, housing secretary and home secretary before being appointed chancellor.
According to TheyWorkForYou, Sunak votes the same way as other Conservative MPs on the majority of issues.
Boris Johnson and Sajid Javid were considering collecting a ‘mansion tax’ from homeowners with larger properties, sources tell The Telegraph.
There’s little detail on how it would actually be implemented, but the revelation has met resistance from Conservative MPs who would usually oppose this kind of policy.
As recently as 2015, Boris Johnson himself decried a mansion tax proposed by then-Labour leader Ed Miliband, saying it would hurt Londoners.
It’s thought that the tax is being considered as a way to raise funds for an expected increase in public spending.
Pension tax relief
Reforms to pension tax relief are also being considered as a money-raising measure, the Financial Times reports.
Currently, workers receive pension tax relief at the rate they pay income tax. So basic-rate taxpayers receive 20% pension tax relief and higher-rate taxpayers 40%.
The potential new plan would see that 40% cut to 20%, so only higher earners’ pensions would be affected.
- Find out more: how pension tax relief works
A cross-party group of MPs has called for a large cut to inheritance tax, and a shake-up to the way it works.
At the heart of these proposals is a plan to cut inheritance tax to 10%, down from its current rate of 40%. A number of tax-free allowances would also be dropped.
Currently, gifts between family members are tax-free if gifted seven years before the giver dies. The group is calling for this rule to be scrapped in an effort to stop owners of larger estates avoiding taxes by giving away their wealth and surviving seven years. There would also be a £30,000 cap on cash gifts over a lifetime.
It’s unclear exactly how many people these changes would affect. Currently, only 5% of estates pay inheritance tax.
Sajid Javid did not comment on these proposals himself, but the Treasury did say it would consider the group’s findings. We’ll find out on Budget day just how seriously it took them.
- Find out more: inheritance tax explained
Access to cash
The Times claims a plan to allow people to take money out at corner shops to help protect access to cash, will be announced in the Budget.
Right now you can get cashback in shops but you usually need to buy something.
It’s also rumoured banks could be forced to make cash available through a ‘universal service obligation’ (USO), similar to what telecoms companies will have to provide on broadband connectivity from March.
If confirmed the new USO could mean banks will be compelled to offer a minimum level of access to cash in communities.
Which? Money has been campaigning to protect access to cash for as long as it is needed.
We’ve charted the alarming rate of bank branch closures, how poorer areas are hit hardest by the loss of free cash machines and highlighted the lessons the UK needs to learn from Sweden’s cashless system.
Which? has asked the government to set out its strategy and timetable on bringing forward legislation to protect access to cash.
Which? has been campaigning for the government to introduce a pensions dashboard for many years. The dashboard would help people keep track of their retirement savings by displaying all of their pension pots, including the state pension, in one place online.
In 2016, the Treasury promised a pensions dashboard by 2019. While that target has been missed, December’s Queen’s Speech announced the return of the Pensions Schemes Bill, which is set to deliver on the promise.
Expect the new chancellor to touch on this during the Budget, with the possibility of a new timeline being introduced.
- Find out more: planning your retirement
Boris Johnson controversially promised a tax cut for high-earners during his Tory leadership campaign. But those plans were ditched in the run-up to the December general election. Now, the focus is on raising the threshold for National Insurance contributions (NICs) to £9,500 in the next tax year, and eventually to £12,500 over a number of years.
Currently, you have to pay 12% NICs on earnings over £8,632. If the chancellor confirms this election promise, this tax will only be payable on earnings over £9,500.
If you earn £25,000, you’d pay £1,964 in NICs under the current rules. With the increased threshold, you’d pay £1,860 – around £100 less.
- Find out more: National Insurance contributions explained
In the Queen’s Speech, her majesty announced her government would ‘take steps to support homeownership, including by making homes available at a discount for local first-time buyers.’
The Conservatives have pledged to give at least a 30% discount to this group of aspiring homeowners, but the lack of detail so far has raised questions over how this plan will work.
It’s so far unclear whether the discount will apply to the private market, housing associations properties, or council homes. And the definition of a ‘local’ buyer is, so far, ambiguous.
If Sunak firms up this plan, dubbed the First Homes scheme, it might replace Help to Buy, which will end in 2023.
- Find out more: affordable housing schemes explained
The social care crisis is one of the key issues facing the UK, with costs often running into the hundreds of thousands for people suffering from dementia, according to the Alzheimer’s Society.
The Conservatives’ last attempt to tackle social care – branded a ‘dementia tax’ – is thought to have cost them a majority at the 2017 election.
The Queen’s Speech said the government will ‘seek a cross-party consensus’ on social care reform, and ensure no one will have to sell their home to pay for social care. The Budget is the chancellor’s opportunity to allocate funding to this process.
- Find out more: average care home fees across the UK
The government-commissioned student finance review, published in May 2019, suggested cutting fees to £7,500 and extending the loan repayment period from 30 years to 40 years. While the lower annual figure may sound like good news for students, a longer repayment period means debts would be written off 10 years later than they are under the current system.
Despite this, the government has been quiet on student finance, with no focus on it during the election campaign or Queen’s Speech. But a surprise announcement during the Budget isn’t impossible.
- Find out more: student finance explained
To save Flybe from the brink of collapse, the government deferred some air passenger duty (APD) payments for the regional airline. Since then, other airlines have complained and suggested they too should benefit from similar treatment.
If APD was to be reduced, the knock-on effect could be cheaper flights. But green campaigners have warned that this would contradict the government’s pledge to tackle climate change.
Transport Secretary Grant Shapps also recently announced £10m of funding for electric vehicle charge points on residential streets. The new chancellor may confirm this in the Budget.
It’s estimated that this will mean 3,600 more charge points around the country that will help people without off-street parking spaces charge their cars overnight.
The measure has been criticised for benefiting wealthy businesses owners and failing to achieve its stated aim of encouraging business investment.
Rather than remove entrepreneurs’ relief altogether, Javid was expected to recalibrate it, perhaps so it’s only aimed at small businesses. Time will tell if Sunak shares the desire to do this.
Can you influence the budget?
The Treasury closed its Budget representations portal on 7 February. People could use this to submit proposals on behalf of themselves or groups they represent.
These representations will not necessarily make it into the final Budget, but the Treasury does say it welcomes them as part of the policy-making process.