“Today’s Budget was always going to be dominated by the response to the continuing spread of the coronavirus,” says Jamie Jenkins, Head of Global Savings Policy.
“Understandably, the new Chancellor, Rishi Sunak, devoted most of his opening remarks to a range of measures intended to support the country. It wasn’t an eventful Budget on the personal finance front, but it was one which will be remembered for the exceptional circumstances within which it was delivered.”
On the personal finance front there were some important announcements.
National Insurance threshold raised
From April, most people will need to earn at least £9,500 before they need to start paying National Insurance (NI). It means around 1 million people will no longer pay NI.
Savings: What you can save into ISAs
While the tax-friendly ISA allowance stays at £20,000, if you’re planning a nest egg for younger family members there is good news – with a big increase in how much you can save into a Junior ISA each year.
You can save up to £9,000 in the 2020-21 tax year (up from £4,368) in a Junior Cash or Stocks and Shares ISA, or a mix of both, and you get a new allowance with each new tax year.
Pensions – changes to the annual and lifetime allowances
The Chancellor announced some specific measures to alleviate the challenges facing individuals like consultants and GPs, many of whom could have faced large tax bills for working additional hours.
The ‘threshold income’ – the amount you can earn before having to calculate a reduced pension saving allowance – is being increased from £110,000 to £200,000.
This will remove the problem for the vast majority of high earners. However, those with income over £300,000 could see their pension allowance cut further. Once their income reaches £312,000 it reduces to £4,000.
The pensions lifetime allowance goes up
As expected, the pension lifetime allowance – the total amount you can take out of your pensions without facing an additional tax charge – will increase in line with the Consumer Price Index (CPI) to £1,073,100 from April 2020.
Income tax – no change*
There’s no change to the personal allowance – that’s how much people need to earn before paying income tax. It remains at £12,500. Income tax rates and bands were unchanged with the exception of Scotland. *If you live in Scotland, read more about Scottish rates and bands for 2020 to 2021.
State Pension gets an increase
While it was announced before the Budget, it’s worth mentioning another bit of good news on the money front.
The new State Pension is going up from £168.60 a week to £175.20 from April for those who are eligible. Those who get the older basic State Pension will see it increase from £129.20 to £134.25.
Check when and what you could get on Gov.uk
There will be two Budgets in 2020
On a final note, this is the first of two Budgets this year as the Autumn Budget was delayed due to the UK General Election.
Keep in touch with us
Follow us on social media for more on the #Budget2020.
Pensions and Stocks and Shares ISAs are investments. They can go down as well as up in value and you could get back less than was paid in.
Tax rules and legislation may change and your individual circumstances will have an impact on the tax you pay.
The information here is based on our understanding in March 2020 and should not be taken as financial advice. If you’re unsure please speak to a financial adviser. There is likely to be a charge for this.