The story of the Spring Budget 2020 has been long and complicated, with further measures likely in the coming months in response to unfolding events. The Budget was originally scheduled for delivery on 6 November by former Chancellor of the Exchequer, Sajid Javid, as his predecessor Philip Hammond had moved the annual occasion from spring to autumn.
With the 12 December general election announced shortly before Budget Day, a delay was inevitable and the new date chosen was 11 March; but on 13 February Mr Javid resigned unexpectedly and deputy Rishi Sunak was appointed Chancellor. With little time to prepare, Mr Sunak faced exceptional challenges: not just Brexit but also the developing threat from COVID-19, which spelt disaster for struggling UK airline Flybe.
Pre-Budget rate cut
Support measures began ahead of the Budget speech. Firstly, the three waiting days to qualify for Statutory Sick Pay (SSP) were axed to help keep COVID-19 from the workplace. Then, on Budget Day morning, the Bank of England announced a cut in its base rate, from 0.75% to 0.25%, and a new Term Funding Scheme to encourage lending. So, even before Mr Sunak rose to speak, underpinning the economy was clearly on the agenda.
Asserting that ‘’we will get through this together’’, the Chancellor outlined a £30bn fiscal stimulus package. This included a £5bn emergency response fund for the NHS and social care services, plus a £1bn Coronavirus Business Interruption Loan Scheme to assist affected firms. Business rates would be suspended in 2020-21 for retail, leisure and hospitality firms with rateable values under £51,000; many smaller businesses could qualify for £3,000 cash grants and SSP refunds.
National Insurance threshold rises
Whist the £12,500 personal allowance for Income Tax and the £50,000 higher-rate threshold are unchanged for 2020-21 in UK nations where the tax is not devolved, the National Insurance threshold rises from £8,632 to £9,500 UK-wide. The new State Pension rises 3.9% from £168.60 weekly to £175.20 and the older basic pension from £129.20 to £134.25. There is a £90,000 uplift to tapered Annual Allowance thresholds for pensions; and the Lifetime Allowance rises with inflation to £1,073,100.
On matters affecting investors, the £20,000 ISA allowance (and £4,000 Lifetime ISA allowance available within it) remains unchanged for 2020-21, but the Junior ISA and Child Trust Fund annual limits rocket from £4,368 to £9,000. The annual Capital Gains Tax exemption increases from £12,000 to £12,300 (£6,150 for trusts). However, Entrepreneurs’ Relief on eligible gains is cut from £10m to £1m, effective 11 March 2020.
Virus forces £350bn post-Budget measures
The post-Budget week saw coronavirus cases escalate and economic prospects worsen, as the public were advised to avoid pubs, restaurants and other places of social contact. On 17 March, Mr Sunak announced urgent measures to help firms and individuals through the crisis. His plan included £330bn in loan guarantees and £20bn in other support, with grants for firms in worst-affected sectors, more business rates holidays and possible help for airlines and other transport operators. A three-month mortgage holiday was promised for strapped homeowners, with help for renters also on the radar. On 18 March, the pound fell sharply against the US dollar and euro.
Mr Sunak said he would take further action if necessary in the ensuing weeks and the general expectation was that more would indeed be required.
Written on 18th March 2020.