Winners and losers give their verdicts on the Budget: National Insurance cuts for 31million workers and a helping hand for struggling pubs – but higher bills for entrepreneurs
- More than 30 million workers will see their tax bill cut by £100 from next month
- NI threshold increase is expected to put about £104 in the pocket of workers
- Pubs were also handed a financial lifeline Wednesday with business rate cuts
More than 30 million workers will see their tax bill cut by about £100 from next month following an increase to the National Insurance threshold.
Chancellor Rishi Sunak announced that the amount of money employees and the self-employed can earn before they have to start paying National Insurance contributions (Nics) will rise from £8,632 to £9,500.
Pubs were also handed a financial lifeline Wednesday with business rate cuts and a freeze to the duty on beer.
Chancellor Rishi Sunak after delivering his Budget in the House of Commons on Wednesday
The NI threshold increase is expected to put about £104 in the pocket of workers who earn more than £9,500, or £78 for those who are self-employed and pay different rates, according to the Budget papers. The Chancellor also promised to raise the National Living Wage from £8.21 an hour to £10.50 by 2024. And he announced plans to extend the minimum wage to workers aged 21 or over. Currently only those who are 25 or over are eligible.
Currently employees who earn more than £166 a week pay NI at a rate of 12 per cent on their salary above £8,632. The rate then drops to 2 per cent on income over £962 a week.
For example, someone earning £1,000 a week would pay nothing on the first £166 they earn, 12 per cent on the next £796 and 2 per cent on the remaining £38. But from April workers will not start paying NI until they have earned at least £183 a week.
About 31 million people are expected to benefit.
David Hicks, tax director at Deloitte, said: ‘The increase to the National Insurance threshold will be welcomed, giving a modest saving to all taxpayers.’ However, critics last night accused the Government of prioritising higher-earners under the guise of helping those on low incomes.
Chancellor Rishi Sunak announced that the amount of money employees and the self-employed can earn before they have to start paying National Insurance contributions (Nics) will rise from £8,632 to £9,500
Myron Jobson, of investment platform Interactive Investor, said: ‘The change was pitched as a respite for those on lower incomes but in reality, the largest proportional gains will go to the well-off.’
Meanwhile, pubs, restaurants, hotels and others in the hospitality sector facing a ‘coronavirus catastrophe’ have been handed a lifeline.
A decision to freeze duty on beer, added to significant cuts in business rates, will deliver savings totalling £270 million to drinkers and pubs, it is claimed.
And there will be a further saving of £184 million by freezing the duty on wine and spirits, rather than imposing a rise in line with inflation.
Smaller pubs will now pay no business rates at all, while larger ones will see their tax relief increase from £1,000 to £5,000.
Other emergency measures, including access to business interruption loans, small business grants and refunds of statutory sick pay for workers, will help the hospitality sector.
Chief executive of the British Beer and Pub Association, Emma McClarkin, said: ‘Pub goers will be toasting the Chancellor tonight for freezing beer duty. This freeze alone will save pub goers £80 million.’
National Insurance cuts a relief for families
For families across the land, every extra pound helps. That’s why Jodie Humphries, 41, welcomed the announcement that the National Insurance threshold will rise.
The mother of two, who runs her own digital marketing business from home, said: ‘That’s great, it’s a small amount but every little helps.
‘We’re hoping to extend our house and we need to remortgage, so with borrowing rates going down, every saving we can make in every direction will go into that.’
Mrs Humphries also welcomed the fuel duty freeze as her video producer husband Richard, 48, commutes to London for work from their home in Maidenhead, Berkshire.
They also sometimes take their children, seven-year-old Anya and four-year-old Adam, to visit family in Birmingham and Cardiff. Mrs Humphries said: ‘It’ll help on those long journeys.’
Grateful: Richard and Jodie Humphries with children Adam, four, and Anya, seven
Candle shop owner welcomes plans to support small businesses
Luxury candle shop owner Drew Cockton welcomed plans to support small businesses through the difficulties caused by the corona-virus outbreak.
The 33-year-old, whose company also makes the high-end candles in the North West, said the business rate holiday was ‘fantastic’.
Mr Cockton, founder of Owen Drew Luxury Candles of Birkenhead, Merseyside, said: ‘We’ve just had a business rates bill through and it’s absolutely ridiculous, the amount.
Drew Cockton (pictured) welcomed plans to support small businesses through the difficulties caused by the corona-virus outbreak
‘In Birkenhead the town centre is struggling, and we pay for the privilege of being here while we’re trying to improve the area.’
He said it is ‘fantastic news’ that small businesses like his with a rateable value below £51,000 will not pay any rates for a year.
Recently the candlemaker had to let someone go due to challenging conditions, so the Government paying for sick pay for employees off due to coronavirus is also a relief for Mr Cockton.
He said: ‘We’re a small business, we employ only six people and being a business owner is hard, some months I hardly get paid so it would be massive for us if we had someone off and had to pay them because of coronavirus. So that is very welcome help.’
Increases to business rates and the minimum wage have put pressure on his bottom line. His company will save around £14,000 next year from the business rate holiday, money which is especially welcome as footfall is down, something he blames on the virus.
He said he will use some of the money saved from the cut to invest in exporting his candles overseas.
He said: ‘Our products have a “Made in England” tag on them which is popular in America and China so that could be a lucrative side of the business, but we can’t really invest in it at the moment.’
After trading online for a number of years the luxury candlemaker opened his first high street shop a year ago.
He also hopes that moves to raise the National Insurance threshold will have some trickle down benefits to his business.
Mr Cockton said: ‘The retail side of the economy is struggling at the moment so more money in people’s pockets is as good thing, it means its back in shops, restaurants and bars. It helps everyone.’
Specialist shoemaker welcomes statutory sick pay announcement
The Government’s decision to finance the statutory sick pay of employees affected by the coronavirus for two weeks was celebrated by businesswoman Jennifer Bailey.
She runs a company in Manchester called Calla Shoes, which sells stylish footwear to women with problem feet.
As a small business, wages to staff – and sick pay – form a large part of costs. Miss Bailey, pictured, employs four people and aims to take on more as the company grows. The 42-year-old said: ‘It’s fantastic because it means as a small employer you’re not having to pay sick pay for people you weren’t really expecting to. It has an effect on cash flow so it is welcome news.’
However she was not impressed with some other policies, particularly the cut to entrepreneur relief.
If she achieves her goals and sells her business for a significant sum, the reforms could cost her hundreds of thousands of pounds.
She said: ‘There are lots of people who are in the same boat and the government haven’t sorted anything to replace it to incentivise people.’
Help for doctors caught out by the pension tax trap
Consultant psychiatrist Dr Kate Lovett was last year hit with a shock £169,000 tax bill she feared would mean she had to quit working for the NHS.
Dr Lovett, Dean of the Royal College of Psychiatrists, last night welcomed the Chancellor’s move to help doctors caught out by the pension tax trap.
She said it was particularly important that doctors did not fear taking on extra work during the coronavirus crisis.
Consultant psychiatrist Dr Kate Lovett (pictured) was last year hit with a shock £169,000 tax bill she feared would mean she had to quit working for the NHS
Dr Lovett, pictured, considered remortgaging her home to cover the tax bill she got in September.
It was not until January that she discovered she had been overcharged £83,000 after a financial adviser offered to review her case. Despite the Budget, she is still having to pay a tax bill over £80,000. The 52-year-old, who works in Plymouth, Devon, said: ‘It is very positive that the Government has clearly listened to concerns and acknowledged the negative impact on the medical workforce. But it won’t remove the fear of debt or the impact of accrued debt.’
She said the system remained complex and many doctors would still worry about exceeding their pension tax allowance.
Dr Lovett added: ‘It is a positive step in the right direction for reforming what is a very complicated system.’
Entrepreneurs’ Relief slashed
Amanda Thomson is furious that Entrepreneurs’ Relief has been slashed.
She is the founder of Thomson & Scott, an online business that sells organic, vegan and alcohol-free sparkling wines. Removing the tax break could cost her hundreds of thousands if she sells her business in the future.
She will effectively be paying 20 per cent capital gains tax on any sum she receives as opposed to 10 per cent.
Feeling flat: Prosecco business owner Amanda Thomson
She said that the Chancellor had bought into the ‘rhetoric of the rich getting richer but the irony is that it is those of us who go all in and really grow the economy who are affected.’ The tax relief was not just for the rich, she said, adding: ‘None of my entrepreneur friends are wealthy, white men.’
Some of the cash from any future sale of her London-based business is earmarked for investing in young women starting their companies.
But with the six-figure hike to her tax bill when she sells up, Amanda is unsure if she will be able to do as much for the next generation as she had hoped.
20million facing lower rates from National Savings
Savers were left short-changed yesterday when the Chancellor pulled the purse strings even tighter at National Savings and Investments.
Rishi Sunak ordered the agency to take in 40 per cent less cash than last year – meaning rates for more than 20million customers are likely to fall further. This is because it will not now be trying to lure in business with attractive rates.
The blow came hours after the Bank of England slashed the base rate to 0.25 per cent, paving the way for banks to offer record low rates. Savers have endured paltry rewards ever since the 2008 financial crisis sent interest rates tumbling. Last month NS&I announced it was reducing payouts – including for the 21million customers with Premium Bonds.
But the Budget brought more bad news as the Treasury announced it would cut the amount of money the bank can bring in, from £10.1billion to £6billion. Last month NS&I announced it would cut rates on 14 savings products. The prize rate for those with Premium Bonds was cut from the equivalent of 1.4 per cent to 1.3 per cent. It means savers are now less likely to win a cash prize in the monthly draws that include two £1million jackpots.
Experts last night warned more prizes are likely to be taken off the table after the Budget, while rates would fall on other NS&I accounts. Rachel Springall, of financial data firm Moneyfacts, said: ‘NS&I is not likely to offer good returns to savers following the drop in the amount of money it wants to bring in.’
Anna Bowes, of advice site Savings Champion, said: ‘This is devastating news for savers who have lived with record low savings rates for over a decade. They have already seen rates cuts accelerate over the last couple of months. Things will get worse.’
The only hint of good news for savers yesterday was a hike in the amount of money parents can put away in to a Junior Isa every year.
From next month, the limit for tax free savings will double from the current £4,368 to £9,000. The £20,000 cap for ordinary Isas is to stay in place. Becky O’Connor, personal finance specialist at mutual Royal London, said: ‘Most people save far less into them than the maximum. So raising the threshold is a bit of an empty gesture for all but the wealthiest Isa savers, who are the most likely to reach this maximum amount.’
The change means parents could build up a pot of £240,000 over 18 years if they put in the maximum and it grows by 4 per cent every year.
Neil Lovatt, from Scottish Friendly, said: ‘This increase will only serve the rich, wealthy and well advised and not the millions of parents and grandparents who want to save and invest for their children.’
Martin Lewis of moneysavingexpert.com said those ‘who’ve worked hard to build up a nest egg will be holding their heads in their hands’ at news of the Bank’s base rate cut.
The rate on Income Bonds, which are popular with pensioners as they pay interest each month, will suffer the most dramatic drop – from 1.15 per cent to 0.7 per cent. It means someone with £50,000 will lose out on £225 a year.
Various bond rates are also being axed by a minimum of 0.15 percentage points.
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