Budget 2020: Top 7 implications for individuals
Just 27 days after his surprise appointment as Chancellor, Rishi Sunak delivered his first Budget to the refrain of ‘getting things done’.
It was a Budget delivered through the increasingly cloudy COVID-19 lens and the UK’s recent departure from the EU.
Changes to the Annual Allowance for Pension Contributions
Although the Chancellor stopped short of announcing an end to the controversial tapered annual allowance regarding pension contributions, there were significant changes to this unveiled today.
For “High Earners” the level of pension contributions can now increase. The detail is as follows:
From 2020/21, the standard £40,000 annual allowance will be reduced by £1 for every £2 of adjusted income (total income before tax from all sources including employer pension contributions) that an individual has over £240,000 in the tax year. Once adjusted income is over £300,000, the annual allowance will be tapered to a minimum of £4,000. However, there is another test for income which can help those who may be caught simply because their pension savings exceed £40,000 in a tax year. So even if their adjusted income is over £240,000, the annual allowance is not reduced if their threshold income (total income before tax from all sources less individual’s pension contributions) is under £200,000 for the tax year.
This will be a welcome change for some as this is an area which has been under scrutiny, with some senior NHS consultants either retiring early, leaving their pension scheme or turning down overtime to avoid punitive tax charges under the former rules. It is worth noting that these rules will apply to all individuals making pension contributions and not just those in the NHS.
Whilst the focus is on individuals this increase in limits may also assist owner managed businesses with their overall financial and wealth planning
It will come as no surprise that the pension lifetime allowance will continue to rise in-line with the Consumer Price Index, to £1,073,100 for the 2020/21 tax year.
Stamp Duty Land Tax (SDLT) surcharge on UK non-residents buying residential property
UK non-residents are to pay an additional 2% Stamp Duty Land Tax surcharge on residential property purchased in England and Northern Ireland from April 2021. The Chancellor’s stated objective is to control house price inflation driven by overseas investment in property and to support UK individuals to get onto the housing market.
In reality, this is unlikely to significantly contribute towards this objective but rather a money raising change, the funds of which to be used to help fund permanent property for rough sleepers.
National Insurance (NI) threshold increased – a tax cut for 31m people
The Chancellor announced a welcomed increase to the National Insurance threshold from £8,632 to £9,500, representing a saving of just over £100 per person a year for some 31m people.
Zero emission vehicles
A £500m fund is to be provided over the next five years to develop an electric vehicle charging infrastructure across the UK to encourage individuals to move to electric and hybrid vehicles. The Chancellor said that the plan was for charging stations to be available to all within a 30-mile radius. Long-term incentives for zero emission vehicles are being “considered” further, but no further detail was announced at this stage.
Support for individuals affected by the coronavirus
A package of support was announced for individuals and their families affected by the coronavirus, including:
- Statutory Sick Pay for those advised to self-isolate even if they are not showing symptoms of the coronavirus. Sick notes no longer need to be obtained in person from a doctor and can be obtained from the NHS helpline 111.
- Contributory Employment Support Allowance and Universal Credit payments will be easier to claim and available following a diagnosis of the coronavirus from day one, not after one week.
- A £500m hardship fund is also to be established for local authorities to manage and distribute to those who are in greatest need.
Women’s sanitary products
As widely publicised, the so-called ‘Tampon Tax’ – the expected change to zero rating on the sale of women’s sanitary products – will take effect from 1 January 2021, the date we leave the EU proper. Technically, as we are still bound by EU rules, this cannot be changed earlier, but there was some expectation that a VAT grant might have been given to bring the date of change earlier. The Government has said that it expects industry to pass on the benefit of the relief to consumers.
Potholes and hospital parking
Good news – The Government will scrap hospital car parking fees in England for those in greatest need. This will include those with a disability and/or terminal illness and their families, patients with regular appointments, parents of sick children staying overnight and NHS staff working night shifts. So not a complete turnaround on charges, but a step in the right direction!
And also, a new annual £500m fund is to be created from 2020/21 running through to 2024/25 to deal with the current poor state of our roads and tackle potholes, which will be a welcome investment for all.
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