At a time when the world is focused on coronavirus, we round up what the latest Budget means for your financial health – and the health of the planet.
Chancellor Rishi Sunak unveiled a £30 billion package of support to boost the economy and get the country through the coronavirus.
Mr Sunak is suspending business rates for many firms in England, extending statutory sick pay and boosting NHS funding in a bid to help the country cope with the coronavirus outbreak. There is also a £500 million ‘hardship fund’ for local authorities in England to help vulnerable people in their areas.
A ‘temporary coronavirus business interruption loan scheme’ enables banks to offer loans of up to £1.2 million to support small and medium-sized businesses.
No rise on big taxes
One of the biggest parts of this Budget (and over this five-year parliament, according to the Conservative manifesto) is something that actually is NOT going to happen. There is to be no rise in the rates of income tax, VAT or National Insurance.
In recent Budgets, chancellors have increased the amount we can earn before we pay tax – this is known as the ‘personal allowance’.
This April, it will be frozen at £12,500 before we start paying 20 per cent income tax. Also frozen is the £50,000 threshold at which people start to pay the higher 40 per cent rate of income tax.
Tax help for workers
The current threshold for National Insurance sees employees and the self-employed paying contributions once they earn £166 a week. This is equivalent to an annual salary of £8,632 a year. From April, we will start paying when we earn £9,500.
That will mean 500,000 people will no longer have to pay this tax, according to independent economists at the Institute for Fiscal Studies (IFS). Those still paying will save up to £85 a year.
Benefits freeze thaws
A freeze on many working-age benefits – including Jobseeker’s Allowance, Employment and Support Allowance, some types of Housing Benefit, and Child Benefit – over the last four years have squeezed the finances of millions.
From April, these benefits will rise in line with the rising cost of living, going up by 1.7 per cent. So, for example, child benefit for the eldest child will go up from £20.70 to £21.05 per week.
Minimum wage rise
Those on the lowest wages will be getting a pay rise in April. Those aged 25 and over will get the National Living Wage of £8.72 an hour, with younger workers also getting more.
State pension lift
Those at the other end of the age spectrum will get a 3.9 per cent state pension rise.
The full, new state pension will go up from £168.60 a week to about £175.20 in April. However, most pensioners get the older basic state pension, which is likely to go up from £129.20 to £134.25 per week. They may also get a Pension Credit top-up.
The rise is the result of the triple-lock system, which means that the state pension rises in line with inflation, earnings or 2.5 per cent – whichever is the highest.
Base rate cut
Some borrowers (those on variable rates) will benefit from the Bank of England’s emergency cut in the base interest rate to 0.25 per cent in response to the “economic shock” of coronavirus outbreak – but savers will lose out.
Lenders indicated that they would pass on the cut to some mortgage customers. However, it’s bad news for savers who have been struggling with rock-bottom rates for the past decade.
It’s unlikely to make a big difference to credit card and personal loan rates, as these are not governed by base rates.
Mr Sunak’s first Budget contained both good and bad news for the environment.
While many long-awaited green measures – including a ‘plastic packaging tax’ and carbon capture schemes – were promised, he also announced big road expansion plans and a freeze on fuel duty.
Mr Sunak said he will shift the UK towards a low-carbon economy with a raft of new initiatives.
The tax break on red diesel for industrial vehicles (except for agriculture and rail) will be axed, in a bid to reduce air pollution in cities. Tax on electricity – which comes increasingly from renewable sources – will be removed, while tax on polluting gas is going up.
Meanwhile, research and development into energy research is to be doubled to £1 billion.
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The Chancellor has boosted the preservation of peat bogs and woodlands by confirming £640 million for a new Nature for Climate Fund.
He has also committed to planting 30,000 hectares of trees (an area larger than Birmingham) across the UK over the next five years.
Two carbon capture clusters will be funded for up to £800 million in the north of England and possibly Scotland, and £500 million has been earmarked for rapid-charging hubs for electric cars.
However, at odds with these climate-friendly plans, is the decision to press ahead with a £27 billion programme of roadbuilding over the next five years. Mr Sunak has billed it as “the largest ever investment in English strategic roads” but green campaigners say it breaches the UK’s laws on climate change.
They also say analysis shows the continued freeze on fuel duty has increased vehicle emissions by around 5 per cent.
For a Budget promising to prioritise climate change, there is one notable absentee policy – insulating Britain’s 40 million homes so they don’t waste energy.
The Chancellor has been criticised for putting off this issue off until the Treasury’s review of net zero emissions policy – due in November.
Meanwhile, a new tax of £200 per tonne on plastic items containing less than 30 per cent recycled plastic has been welcomed by the recycling industry.
The Chancellor has also re-iterated his pledge to double spending on flood defences, committing a further £5.2 billion to protect more than 300,000 homes over the next six years.