The economic challenge posed by the virus dominated the budget.
The following key points outline the Chancellor’s bid to support the UK:
• To support the NHS and other public services, a £5bn emergency response fund will be available - and can be enlarged if necessary.
• An additional fiscal loosening of £18bn to support the economy this year.
The Chancellor summarised: "That means I am announcing today, in total, a £30bn fiscal stimulus to support British people, British jobs and British businesses through this moment."
This support for the UK economy is welcome in light of the effects of the coronavirus on markets. For more information on how markets are responding, read our recent Market Review.
Annual Allowance (AA) taper thresholds
The chancellor has made significant changes to the pension annual allowance by increasing the ‘threshold income’ – the amount you can earn less the value of any pension contributions you’ve made personally before having to calculate a reduced pension saving allowance.
The threshold income will increase by £90,000; from £110,000 to £200,000. The adjusted income limit – your total income plus the value of any pension payments made by your employer - is also rising by £90,000 from £150,000 to £240,000.
This measure will be welcomed by many high earners and may present an opportunity for some to save more into their pensions without the fear of additional charges. Before making any changes to pensions contributions, it can be wise to consult your Financial Planner.
However, the announcement may not be welcomed by all high earners. Mr Sunak also announced measures to cut the pensions allowance to £4,000 from £10,000 for those with an adjusted income above £312,000. In the face of such reductions, great financial planning can play an important role to ensure you stay within your allowance limits and don’t need to pay unnecessary additional tax charges. Don’t hesitate to contact your Planner if you have any concerns.
The lifetime limit for entrepreneurs’ relief, a tax break which mostly benefits individuals selling their business, will be from £10m to £1m. This means business sellers will pay 10% on lifetime gains of up to £1m, compared with the previous upper limit of £10m. Above £1m, business owners will be charged standard capital gains tax rate, which is 20% for higher-rate taxpayers.
While the government believes 80% of individuals using this relief will be unaffected, this could see a knock on effect for some business owners who are considering selling their business. Again, great financial planning could help mitigate any unexpected tax and help you think about next steps for your finances.
National Insurance threshold
The National Insurance threshold will be raised from £8,632 to £9,500 next month.
"That’s a tax cut for 31 million people, saving a typical employee £104," Mr Sunak announced.
Whilst the overall annual £20,000 ISA allowance has not changed, the Junior ISA has increased from £4,368 to £9,000.
In a landscape where many people are giving a financial boost to the younger generation, this increase represents an opportunity to gift more in a tax efficient way.
If you have questions about how any of the announcements could affect your financial plan, please do not hesitate to content your 1825 Planner.
Laws and tax rules may change in the future. The information here is based on our understanding in March 2020. Personal circumstances also have an impact on tax treatment. The information in this blog should not be regarded as financial advice.