A new Chancellor facing the aftermath of Britain’s departure from the EU and a virus outbreak that is causing chaos globally. It’s fair to say that not many of us envied Rishi Sunak as he presented this year’s hotly anticipated Budget announcement.
However, it was impossible not to pick up on the overarching message of “getting it done” – a promise to protect businesses through a time of crisis. But what did the Budget ‘get done’, in reality?
Prefaced by a commitment to fund “whatever it takes and whatever it costs” to help the Health Service to see us through the Coronavirus challenge, yesterday’s Budget announced huge spending plans for the coming Parliament.
Roads, nurses, hospitals, police, research and development, loan funding facilities, broadband, electric charging points, new stations, Manchester to Leeds rail, high-rise cladding replacement, mental health support, rough sleeping all combine to make this the biggest public sector commitment in modern history.
In overall terms, the Chancellor talked about a Parliament package of £600bn, apparently tripling the average annual public sector investment made over the last 40 years.
The overwhelming message was that this is the government of public service, addressing all the needs and interests of the public. A government that is “getting it done”.
Coupled with major spending plans were one or two sundry tax-relieving announcements within the speech, notably:
- The lower earnings limit below which no National Insurance is payable will increase from £8,632 to £9,500 from 6 April – worth £104 per annum for every employed or self-employed taxpayer;
- The threshold above which the annual allowance for eligible pension contributions will start to be withdrawn increases from £110,000 to £200,000 (but a fully tapered allowance will then fall as far as £4,000 [currently £10,000]). This caters principally for the doctors, many of whom have been reducing their hours as a result of the pension allowance restrictions; and
- There will be a freezing of duties across all alcohol products, and a further extension of the longstanding freeze on fuelled duty.
The much-feared “scrapping” of Entrepreneurs’ Relief will not be a total abolition after all. Instead, this 10% Capital Gains Tax rate will apply to a significantly curtailed lifetime gain, down from £10m to just £1m, with effect from today. This is the level where this relief began in 2008. It is expected that this will ensure that enterprising small business owners will continue to benefit, leaving over 80% of those using the relief unaffected.
Subject to Coronavirus, these measures might help generate growth well above the previous forecasts of the Office for Budget Responsibility – even as high as 2.8%, the Chancellor claimed, which is well above the pre-Corona 1% to 2% expected range.
In the meantime, the threat of the pandemic is material. An extensive range of short-term measures, anticipated to cost £7bn in total, are in place to help domestic and business sectors get through this challenge financially.
Download our handy Budget Summary for a full round-up of the changes, as announced on 11 March 2020.
If you would like to discuss in more detail how any of the changes may impact you and your business, please contact your relationship principal or email our Tax Partner, Chris Barrington.