The Chancellor laid out his ‘plan for prosperity tomorrow’ in the Budget, including a rise in the national insurance threshold and an increase in the National Living Wage.
He also outlined measures to combat the financial effects of coronavirus, promising that all those advised to self-isolate will be entitled to claim statutory sick pay if eligible, even if they aren’t showing any symptoms of the illness.
Here’s our rundown of some of the measures announced in Rishi Sunak’s Budget and how they might affect you.
The threshold at which workers start paying national insurance will increase from £8,632 to £9,500 at the start of the new tax year on April 6, saving the typical full-time employee £104 and the average self-employed worker £78.
Despite plenty of speculation that the Chancellor could raid pension tax relief in this year’s Budget, it escaped unscathed and remains one of the key benefits of pension saving.
If you’re a basic rate taxpayer, you’re entitled to 20% tax relief on your pension contributions, which means if you pay £80 into your pension, the taxman will boost this to £100. Higher and additional rate taxpayers benefit from 40% tax relief or 45% tax relief respectively. Everyone can save up to £40,000 a year into a pension and benefit from tax relief, or up to 100% of their earnings, whichever is lower. This £40,000 annual allowance reduces gradually for those earning £110,000 or more, but the Chancellor announced that from April 6, no-one earning less than £200,000 will have their allowance tapered.
Although tax relief survived the Budget, Wednesday’s interest rate cut to a record low of 0.25% by the Bank of England was less positive for pension savers. A reduction in the base rates could mean lower long-term interest rates which may in turn lead to lower annuity rates. Many pension savers have already seen the value of their retirement savings fall as markets react to the spread of the coronavirus.
The state pension will rise by 3.9% from April 6, so those who receive the new state pension will see their payments increase from £168.60 a week to £175.20 a week. Pensioners receiving the older basic state pension, will also see their payments increase by 3.9%, from £129.20 to £134.25 per week.
As well as promising statutory sick pay for those who self-isolate, the Chancellor said that people who are affected by coronavirus who are eligible for contribution-based employment and support allowance will be claim this benefit from the first day of sickness rather than the eighth.
The government will also temporarily remove the minimum income floor for the universal credit benefit, which should ensure self-employed claimants will compensated for lost earnings as a result of the coronavirus.
Fuel and alcohol duties
Fuel duty has been frozen for the tenth consecutive year. Duty on beer, cider and wine will also remain unchanged.
National Living Wage to rise
The National Living Wage, the minimum rate employers must pay employees aged 25 or over for each hour they work, is currently £8.21 per hour, and will increase by 6.2% to £8.72 per hour from April 1. By 2024, the Chancellor said that “as long as economic conditions allow” the National Living Wage will reach two-thirds of median earnings, which based on current forecasts would be £10.50 an hour.