With Chancellor Rishi Sunak announcing a budget that he says will pave the way for the UK’s recovery from the coronavirus pandemic, we look at what it means for your personal finances – and the planet.
Coronavirus crisis support
The furlough scheme – which pays 80 per cent of employees’ wages for the hours they cannot work in the pandemic – has been extended until September.
While furlough supports employed people, the self-employed can get help through the Coronavirus Self-Employed Income Support Scheme (SEISS). From next month, claims can be made for a fourth grant worth 80 per cent of three months’ average trading profits, up to £7,500 in total.
However, the amount paid will depend on the amount of turnover lost. People whose turnover has fallen by less than 30 per cent will receive a grant that is equivalent to 30 per cent of average trading profits.
The National Living Wage will rise to £8.91 from April, from £8.72.
No tax increases, but pay rises will bring tax shock
Although there is no rise in income tax, national insurance or VAT, the tax bill that people may face in future years could go up.
Currently, people start paying 20 per cent income tax when they earn £12,500 a year. The starting point for paying the higher 50 per cent rate is £50,000. These thresholds will go up to £12,570 and £50,270 respectively in April, but will then be frozen for five years.
With these thresholds maintained at the same level until April 2026, many people receiving a pay rise may find themselves in a new tax bracket and having to pay more.
Pension lifetime allowances frozen
The lifetime allowance is the maximum amount that you can save into your pension without having to pay extra tax. The current allowance is £1,073,100 and was expected to rise in line with inflation – but now it will be held until April 2026. A pension pot of more than a million may seem like a lot, but over a retirement spanning around 30 years, it is likely to pay less than the average UK wage.
Help with housing
A mortgage guarantee scheme will help people to buy property with small deposits. Under the scheme, the Government will offer lenders a guarantee, incentivising them to boost the number of riskier 95 per cent mortgages.
There will also be an extension to the stamp duty holiday for properties worth under £500,000 until the end of June. The holiday for properties worth less than £250,000 will apply until the end of September.
With the UK hosting the UN COP26 climate talks in Glasgow in November, the Budget aimed to highlight the importance the UK places on reducing carbon emissions. However, it didn’t extend to raising the rate of petrol duty.
Sunak emphasised the importance of creating green jobs as part of the UK’s recovery from coronavirus. He announced £4.8 million to support the development of a hydrogen hub in Holyhead, which will pilot the creation of hydrogen from renewable energy and create up to 500 green jobs.
A new £20 million programme will support the development of floating offshore wind technology across the UK.
Green savings bonds
The Chancellor aims to unlock some of the £143 billion worth of lockdown savings by Brits to fund the country’s green recovery from the coronavirus pandemic.
Ordinary savers will be able to buy into ‘green savings bonds’ offered through National Savings & investments later this year.
Funds raised will be ‘earmarked for projects such as renewable energy and clean transportation that will help the UK build back greener and meet its target to cut greenhouse gas emissions to net zero by 2050’, the Treasury said.
The bonds will enable everyday savers to buy into the Government’s £12 billion ten-point ‘green industrial revolution’. This will include expanding offshore wind power plants, planting 30,000 trees and revamping UK homes and public transport.
However, just £3 billion of the money, announced last November, is new, and the chief executive of the Government’s advisory Committee on Climate Change, Chris Stark, said the ten-point plan ‘doesn’t take us all the way to net zero’.
‘First ever’ government-owned green bank
A new government-owned infrastructure bank, based in Leeds, will support projects that go towards meeting the UK’s target of net zero carbon emissions by 2050. Sunak said the bank will support £40 billion of projects, focussing on offshore wind, and will receive an initial £12 billion in capital.