UK Budget 2020 & the impacts on you
Posted on 5th March 2020
Newly appointed chancellor Rishi Sunak is scheduled to announce the 2020 budget on March 11th. This will be the first budget for the United Kingdom as a non-EU state since more than 40 years. What is expected to come of the upcoming budget changes and how will they affect you? Some of the major changes include tax cuts, benefits to first time home buyers, and changes in the minimum wage. Here are the details, and how they will impact your personal finances.
Tax Changes
Tax cuts in the form of an increase in National Insurance
National Insurance is an important piece in the welfare system that serves as a social security for workers and their families. Currently, you can earn up to £8,632 before having to make any contributions, but with the upcoming changes in the budget, it’s expected to increase to £9,500 before being required to make contributions. The affects that this will have on your personal finances will be approximately £100 per year if you make at least £12,600 or more. Although this may seem like a small amount, every little bit helps!
The tax cuts in the form of an increase in NI has been confirmed in the December Conservative election manifesto saying: “We will raise the NI threshold to £9,500 next year – representing a tax cut for 31 million workers. Our ultimate ambition is to ensure that the first £12,500 you earn is completely free of tax – which would put almost £500 per year in people’s pockets.”
Pension tax relief
The pension tax relief allows you to get tax reliefs on contributions to your employers pension up to 100% of the amount contributed, or a maximum of £40,000 in annual relief, whichever is lower. The way it works is you get a tax relief on whatever your maximum marginal tax rate is. For example, if someone earns £30,000 their tax rate is 20% and thus get a 20% relief on pension contributions. The same applies to those with a high 40% tax rate, which means they get a 40% tax relief on pension contributions.
The pension tax relief expected from Rishi Sunak is an attempt to level everyone’s tax relief to somewhere between 20% and 30%. This means removing the high-income earners of the whopping 40% tax relief they have been enjoying and leveling out the playing field for everyone.
First Time Home Buyers
The upcoming budget may have some exciting surprises for first time homebuyers. In an attempt to make home ownership more affordable to our population, the Queen has stated that they will launch a “First Home scheme” that allows people to enjoy a discount on purchasing a property of up to 30 percent.
The plan is to allow 200,000 newly built homes each year available to first time homebuyers that are under the age of 40 years old to get at least 20% off the going market price. The home prices are expected to be approximately £250,000 for homes outside of London and up to £450,000 for homes within London.
Minimum Wage Changes
Minimum wage increases have been hoped for by many as the economy grows, and this time there are already confirmations that expected increases are awaiting in the upcoming budget announcement. The minimum wage changes will be as follows:
For workers aged over 25 years old, the minimum wage will increase from £8.21 per hour to £8.72 per hour.
Workers between ages 21 to 24, minimum wages will increase to £8.21 per hour
Workers between ages 18 to 20, minimum wages will increase to £6.45 per hour
Workers under the age of 18 will see increases to £4.55 per hour
And workers under age 18 will have a minimum wage of £4.15 per hour
This means more money in your pocket which also means a potential boost in economic activity due to the available spending money the population has.
Tagged as: Budget
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