The European Central Bank (ECB) revised its forward guidance, indicating it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.
The Chancellor of the Exchequer Rishi Sunak has announced that
the bill for addressing the coronavirus pandemic is currently £407bn, which is
equivalent to 10x HS2 projects or 20 Crossrail’s.
The key financial changes announced in the budget are as
The basic rate income tax threshold has been slightly increased from April 2021 to £12,570 from £12,500 and the high rate threshold to £50,270 from £50,000. The thresholds will then stay at these levels for the following 5 years.
The inheritance tax nil-rate band will remain at the existing level of £325,000 and also the residence nil-rate band of £175,000 until at least 2026. The residence nil-rate band taper will continue to start at £2 million.
The capital gains annual exempt amount has also been frozen at £12,300 until 2026.
Dividends also escaped. The tax-free dividend allowance has been kept at £2,000.
The pension lifetime allowance has also been frozen at £1,073,100 until 2026.
The state pension will however rise by 2.5% next tax year and the triple lock will remain in place.
The 0% stamp duty land tax holiday on the first £500,000 has been extended until 30 June 2021. The threshold will then be reduced down to £250,000 for a further 3 months and then return back to £125,000 from October.
Lenders have been withdrawing from providing low-deposit mortgages. Therefore to help first time buyers the government is guaranteeing 95% loan-to-value mortgages up to £600,000.
From April 2023 corporation tax will increase for companies with profits above £50,000. Tapering from 19% up to 25% above £250,000. This will affect the UK companies, but as it is progressive and can be offset by ‘super deduction’ on business investment as companies investing can benefit from a 130% first-year capital allowance.
IR35 changes delayed from last year will go ahead in April 2021. Companies must now collect income tax and NIC from the contractor’s fee and pay it over to HMRC.
The furlough scheme will be extended until October 2021. However, employers will be asked to contribute 10% in July and increased to 20% in August.
The trading loss carry-back rule has also been extended from the existing one year to three years.
The VAT reduction for the UK’s tourism and hospitality sector has been extended until October 2021 and reduced rate of 12.5% will then be applied until April 2022.
Business rate reliefs have also been extended to July 2021 and then a reduced rate of 66% until April 2022.
Chancellor, Rishi Sunak, has announced a range of measures to try and kick-start the economy.
The big story is a cut in VAT for the hospitality sector from 20% to 5% and this will apply to eat-in or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, attractions like cinemas, theme parks and zoos.
He also announced a temporary stamp duty holiday until January 2021 to stimulate the property market. This would exempt the first £500,000 of all property sales from the tax.
The government will pay businesses a £1,000 bonus for every staff member that is kept on for three months when the furlough scheme ends in October. To qualify, the employee must be paid at least £520 on average, in each month from November to the end of January.
New schemes were announced to boost employment and training opportunities for 16 – 24 year olds. This includes a ‘Kick Start’ scheme to assist those at risk of long term unemployment by funding six-month work placements to those on universal credit. Further support will be provided to young people in England: funding of £1,000 for each new work experience place; for apprenticeships – funding of £2,000 for each new apprentice aged under 25, and £1,500 for each new apprentice aged 25 and over, from 1st August 2020 to 31st January 2021. The apprenticeship payments will be in addition to the existing £1,000 funding that is provided for young apprentices.
There was also a scheme announced that will be launched in August to give 50% off to people dining out. The scheme will mean 50% off meals eaten at any registered business between Monday to Wednesday in August, up to a maximum discount of £10 per head (including children).
UK Chancellor of the Exchequer Rishi Sunak pledged an additional GBP 30 billion to support employment, on top of the GBP 133 billion in coronavirus measures he has already unveiled. The money includes over GBP 5 billion in accelerated infrastructure spending, about GBP 9 billion for employers to retain workers through the end of January, funds for home insulation, and help for homebuyers and for hospitality firms.
The UK base rate is cut to an all-time low of 0.1% and the Bank has also announced an emergency £200bn of bond buying.
The Bank of England has announced an emergency unscheduled 0.5% cut in
the bank rate.
The interest rate cut is part of a series of a comprehensive and timely package of measures to help UK businesses and households bridge across the economic disruption that is likely to be associated with Covid-19.
UK house prices fell by 0.1 per cent last month taking growth over the year to only 0.9 per cent, according to the latest monthly survey of the property market by Halifax. The slowdown means that prices rose at their slowest annualised rate this year and the cost of an average house this month stands at £232,249, the Halifax said.
Tesco has pulled out of the mortgage market amid a price war among lenders that has pushed down rates for borrowers and piled pressure on smaller providers. The 23,000 mortgage customers of the supermarket’s banking business will not see any immediate change to existing arrangements.
Yorkshire Building Society has become the latest big name to launch an interest-only mortgage. If you have a reasonable deposit saved up please give us a call.
Interest-only mortgages were once common but virtually disappeared after the financial crisis, amid fears that many borrowers were not setting aside enough money to repay their debt. Borrowers do not repay any capital during the course of the loan, so when their mortgage term ends they need to pay back their equity.
Under new lending criteria, borrowers have to show lenders that they have a repayment strategy in place.
There were twice as many interest-only products on the market earlier this month as there were six years ago, according to Moneyfacts.
Annual house price growth has slumped to 1.7 per cent in January 2019 – the lowest rate since 2013. The latest House Price Index from the Office for National Statistics showed the average UK house price was £228,000 in January 2019, an increase of 1.7 per cent over the year, but down from the 2.2 per cent annual growth in December 2018.