Rishi Sunak may have only been Chancellor for four weeks, but he has certainly started with a bang, explains Hazlewoods
Rishi Sunak may have only been Chancellor for four weeks, but he has certainly started with a bang. Rarely do you see such a significant spending plan with very little in the form of tax measures to pay for it. It would appear clear that the Chancellor is going to be using the very low interest rates currently available and borrow to fund, because the annual net cost of the measures announced amount to £42 billion by 2024/25.
The backdrop of the Coronavirus outbreak meant that the Chancellor immediately had to address what the government was going to do to assist businesses and the NHS. This came in the form of a £30 billion package of measures including statutory sick pay for those who are advised to self-isolate, even if they are not displaying symptoms and £5 billion for the NHS and other public services.
Further spending promises came for road, rail, housing and broadband projects that could, in total, come to £600 billion.
On the tax side, the giveaways kept coming, with the national insurance contributions tax threshold rising from £8,632 to £9,500, the abolition of VAT on women's sanitary products, to come in from 1 January 2021 and a freeze on beer, cider, wine, spirits and fuel duty, even though the Chancellor stated they could no longer afford to continue to freeze fuel duty!
He also confirmed some of the giveaways that had previously been announced, including an increase in the structures and building allowance from 2% to 3%, and increase in the R&D expenditure credit from 12% to 13% and an increase in the employment allowance from £3,000 to £4,000, but only for businesses with less than £100,000 employer's NIC in the prior year.
And then came the less positive news, with the entrepreneurs' relief allowance reducing from £10 million to £1 million, the same rate as on its introduction in 2008, with immediate effect.
Pensions continue to be tweaked, predominantly because of the impact the rules have on surgeons and consultants, who are reluctant to take on extra shifts, because of the punitive tax they end up paying. As a result, the thresholds at which the £40,000 pensions contribution is tapered have been increased by £90,000. However, the allowance will now taper down to £4,000 from 6 April 2020, rather than the £10,000 that currently exists.
It was always going to be a challenge for the Chancellor to put together a Budget amidst so much economic uncertainty and it is perhaps not surprise that his tax measures are relatively light touch. However, the books will have to be balanced eventually, which may well result in additional tax raising measures in the future.
