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Budget 2020: what you need to know

Find out what the Chancellor's Budget announcements mean for you

Budget 2020: what you need to know

Chancellor of the Exchequer Rishi Sunak has delivered the first Budget speech in over a year, with a clear focus on measures to alleviate the impact of the coronavirus pandemic.

Mr Sunak’s Budget speech also covered changes to National Insurance thresholds, broadband, infrastructure spending and pensions.

Here, Which? explains what the Chancellor announced and how it could affect your finances.


Billions pledged to combat coronavirus

The Chancellor opened his speech to the House of Commons by outlining his ‘fiscal response’ to the outbreak of Covid-19.

The plan includes:

  • Extra NHS funding: Mr Sunak promised to give the health service whatever it needs to cope with the virus, ‘whether that’s millions or billions of pounds’.
  • Extending statutory sick pay: it will now be available for eligible self-isolating workers, even if they don’t show symptoms, and for those caring for people with Covid-19 symptoms in their household. This doesn’t include the self-employed or low earners. You will also be able to get a sick note over the phone by calling 111.
  • Help for small businesses: the government will refund the costs of statutory sick pay to eligible small and medium-sized businesses. Some of these businesses will also be offered loans to cover losses.
  • Business rates reform: retail, leisure and hospitality businesses with a rateable value of under £51,000 will pay no business rates at all for the 2020-21 tax year. Some 700,000 small businesses which are not eligible for this relief will be offered £3,000 cash grants.

In total, the Chancellor said he will spend £30bn on bracing the economy for the outbreak, and promised to spend more if needed.


Listen: our experts discuss the Budget on the Which? Money Podcast.


National Insurance threshold raised

National Insurance contributions (NICs) will only be payable on annual earnings over £9,500 in the next tax year.

This is up from £8,632 this year. NICs of 12% will be payable over the new threshold, which the Treasury estimates will save the typical employee £104 a year. A typical self-employed person will get a boost of £78.

The Chancellor said this will amount to a tax cut for 31 million people in the UK.

Pension taper increased by £90,000

Mr Sunak also unveiled plans to increase the tapered annual allowance thresholds by £90,000.

This will apply to all high earners, but will particularly help to ease the pressure on some NHS workers (eg doctors and surgeons) who’ve received large tax bills as a result of working longer hours.

Broadband and 4G coverage boost

The Chancellor announced a £5bn fund to bring gigabit-capable broadband to 95% of the country in the next five years.

This is 40 times faster than standard superfast broadband, but it’s currently only available in limited areas. The government will fund the infrastructure broadband providers need to roll it out.

£510m was also announced for expanding 4G coverage. The plan is to bring 4G to 95% of the UK’s landmass by 2025, including rural areas that currently have poor signal.

At the 2019 general election, Which? called for any future government to improve online connectivity across the UK.

Legislation promised to protect access to cash

It wasn’t mentioned in the speech, but the written red book confirms that the government will enact legislation to protect cash payments for the millions who rely on notes and coins every day.

Anabel Hoult, Which? CEO, said: ‘Which? urged the Chancellor to protect cash in this Budget and we are delighted that he has listened to consumers and is ready to legislate to help millions of people who have been hit hard by bank branch and cash machine closures.

‘We know that the cash system is at risk of collapse within the next two years, so we look forward to working with the government, regulators and industry to ensure this commitment is swiftly turned into action that protects cash for as long as it is needed.’

Stamp duty surcharge

Buyers based overseas will have to pay a 2% stamp duty surcharge on residential property in England and Northern Ireland from April 2021.

If the overseas buyers are not intending to live in the property themselves, they will have to pay an additional 3% – totalling 5% above the standard rate.

The government says it will use money from this surcharge to reduce rough sleeping.

Pothole funding boost

Local councils will be offered £2.5bn of funding to fix 50 million potholes over the next five years.

This comes after Which? research revealed the extent of the UK’s pothole problem last year.

‘Tampon tax’ and ‘reading tax’ abolished

The 5% rate of VAT has been removed from sanitary products, bringing what’s known as the ‘tampon tax’ to an end from next January.

According to the Treasury, this will cut each 20-pack of tampons by 7p and each 12-pack of pads by 5p, saving the average woman £40 over her lifetime.

Since 2015, the government has pledged to donate revenue from the tampon tax to charities working with vulnerable women and girls. Campaigners have welcomed the tax’s removal, but have urged the government to continue to fund these charities once it has been abolished.

The Chancellor also abolished what has been dubbed the ‘reading tax’ of 20% VAT levelled on books and e-books from 1 December. He said: ‘Just in time for Christmas, books, newspapers, magazines or academic journals, however they are read, will have no VAT charge whatsoever.’

Incentives to buy green vehicles

The Plug-in Car Grant, which gives you a discount on electric vehicles, will be extended to the 2022-23 tax year.

This grant is paid to dealerships, allowing them to reduce the prices of their vehicles for consumers. The maximum grant available for cars is £3,500.

The Budget also included measures to build more electric charging points. Over the next five years, £500m will be spent on expanding the nation’s charging network, with the intention being that no driver will ever be more than 30 miles from a rapid charging station.

Alcohol duty frozen

Alcohol duty on beer, spirits, wine and cider will stay the same for the 2020-21 tax year.

This tax is included in the price you pay for alcoholic drinks, and the amount you pay varies based on the type and strength of the drink.

The table below shows how much you’ll pay per litre.

Fuel duty has also been frozen for the tenth year in a row, despite speculation that it would rise.

Tobacco duty will rise in 2020-21, and no changes to sugar tax were mentioned in the Budget.

Budget 2020: live updates as it happened

13:40 That’s it!

The Chancellor has taken his seat. Jeremy Corbyn will now give the Labour Party’s response and MPs will hold a debate.

Stay tuned to Which? Money’s Budget 2020 coverage for more on what the announcements mean for you throughout the day. 

13:37 Pension earnings threshold moves from £110k to £200k

This will ease the pressure on some NHS workers (such as doctors and surgeons) who’ve received large tax bills as a result of their earnings.

13:34 New 2% stamp duty surcharge for overseas buyers

13:30 Affordable Homes programme extended, other housing pledges

A new multi-year settlement of £12bn will be given to the programme. A fund of £1.1bn will go towards 70,000 new homes in high demand areas. 

£650m of funding will help rough sleepers into permanent accommodation through buying 6,000 new living places.

13:28 ‘Reading tax’ abolished

Books, magazines, academic journals and newspapers will no longer be subject to VAT from 1 December – however they are read. 

13:25 Billions pledged to fix potholes

The £2.5bn fund is intended to patch up potholes – a major annoyance for drivers across the country. This will fix 50m potholes by the end of this parliament, the Chancellor says.

Read more: government pledges to fix potholes

13:22 Better broadband and 4G funding announced

£510m will be spent in expanding 4G coverage, and £5bn on bringing gigabit-capable broadband to reach 95% of the country in the next five years.

13:20 ‘Get Britain building’

£600bn to be invested in infrastructure spending. London-style funding will be given to metro mayors.

13:17 Flood defences boost

The government will spend £5.2bn on flood protections for over 300,000 properties over the next six years.

13:16 Taxes to be cut on green transport

Buying low emission vehicles will become cheaper, and £500m will be spent on new electric car charging hubs.

13:12 New Plastic Packaging Tax to be introduced

Part of the government’s plan to tackle plastic waste. The charge will be levied on manufacturers. 

13:10 Entrepreneurs’ relief reduced, but not removed

13:08 Alcohol and fuel duty frozen

The rate of tax charged on alcohol and fuel will stay the same next year. This is the tenth year in a row fuel duty has been frozen. 

13:06 ‘Tampon tax’ abolished

The 5% rate of VAT on sanitary products – known as the ‘tampon tax’ – will be abolished.

According to the Treasury, this will cut each 20-pack of tampons by 7p and each 12-pack of pads by 5p, saving the average woman £40 over her lifetime.

13:04 National insurance threshold increased to align with personal allowance

The Chancellor has confirmed the election pledge to raise the annual threshold for National Insurance contributions (NICs) to £9,500 in the next tax year.

Currently you pay NICs of 12% on earnings over £8,632. From April, you’ll only pay them on earnings over £9,500.

The Treasury estimates a typical employee will benefit from the boost by an average of £104.

This will be a tax cut for 31 million people.

13:02 National Living Wage boost

National Living Wage is projected to rise to £10.50 per hour by 2024.

This is distinct from the Living Wage Foundation’s real Living Wage, which is calculated based on the cost of living, and the same for people of all ages.

Employers can choose to pay the current real Living Wage of £10.75 in London or £9.30 in the rest of the UK should they wish to, whereas the government’s National Living Wage is compulsory.

Nearly 6,000 employers across the UK pay the real Living Wage.

12:54 OBR economic growth predictions

Here are the predictions on economic growth from the Office of Budget Responsibility:

12:51 £30bn fiscal stimulus

The total of Mr Sunak’s coronavirus outbreak three-point plan is £30bn, and he will go further if necessary, he says.

12:50 Business rates to be abolished for some businesses

Any eligible retail, leisure or hospitality business with a rateable value of £51,000 will pay no business rates in the next tax year.

£3,000 cash grants are also promised to 700,000 small businesses not eligible for small business rates relief.

12:46 Government to refund sick pay for small businesses and coronavirus loans

Businesses with fewer than 250 employees will receive statutory sick pay refunds from the government for up to 14 days.

The ‘coronavirus business interruption loan scheme’ will offer loans of up to £1.2m and will cover up to 80% of losses with no fees to small and medium businesses hit by the outbreak.

12:43 Statutory sick pay update

Statutory sick pay will be available for everyone self-isolating, even if they don’t show symptoms.

You will also be able to get a sick note over the phone by calling 111.

Here’s our guide to statutory sick pay.

12:42 Extra resources for NHS

Whatever the NHS needs, it will get, the Chancellor says. ‘Whether it’s millions of pounds or billions of pounds.’

12:39 Temporary impact on economy

The Chancellor says up to a fifth of the working-age population could be off work and business supply chains are being disrupted. But ‘life will return to normal’.

He says there will be a ‘significant impact on the UK economy,’ but it will be temporary.

12:36 ‘Doing everything we can’

Mr Sunak opens with a message about coronavirus, saying it is ‘an issue above party’. The House is ready to come together and act in the national interest, he says.

Today he will set out the economic response to the outbreak.

12:35 And we’re off…

The Chancellor is at the dispatch box delivering the first Budget after almost 18 months.

12:33 PMQs still going

Mr Johnson is still taking questions past the time the Budget was expected to start. Mr Sunak must be itching to get off the bench.

12:30 Infrastructure ‘revolution’

Mr Johnson again anticipates the imminent Budget by hailing an incoming ‘revolution’ in infrastructure.

12:26 Prime Minister teases homes announcement

Answering an MP’s question, Mr Johnson said the House will soon be hearing the government’s plans to help young people buy homes.

12:00 PMQs begins

Prime Minister Boris Johnson has started taking questions from Leader of the Opposition Jeremy Corbyn.

Most weeks this is Wednesday’s main event in the Commons, but today everyone’s waiting for the Budget, which will be right after.

11:57 The Chancellor has left 11 Downing Street

Chancellor of the Exchequer Rishi Sunak is on his way to the House of Commons ready to give the first Budget in over a year. The BBC has the traditional ‘red box picture’.

11:48 Join the conversation on Twitter

Share your thoughts and questions about the Budget with us by tweeting @WhichMoney.

11:40 Coronavirus news updates

While we’re waiting for the Budget you can keep up with our coverage of what the coronavirus outbreak means for consumers below.

We’re expecting measures to help the economy during the outbreak to be a major focus of the speech. 

07:15 Bank of England cuts base rate to 0.25%

Before the Budget has even begun, the Bank of England has kickstarted the day by announcing it will cut the base rate from 0.75% to 0.25%.

This is the first unscheduled cut to the base rate (which affects interest rates for borrowers and savers) since the financial crisis in 2008, and has brought the base rate back down to the lowest level in history.

The Monetary Policy Committee, which voted unanimously yesterday to cut the rate, said the decision was made in order to help households and small businesses survive the economic fallout caused by the coronavirus.

The move follows an announcement by some banks yesterday that they could allow homeowners to defer mortgage payments and savers to access cash locked up in fixed-term accounts.

 

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