This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your financial adviser here at Vesta Wealth in Cumbria, Teesside and across the North of England.
On 8th July 2020, Chancellor Rishi Sunak brought forward his Summer Statement to the House of Commons – widely anticipated, beforehand, to not contain many new policies. The reality turned out to be quite opposite, with many key announcements leading to pundits calling it the July ‘Mini Budget’. Here at Vesta Wealth, our financial advisers offer this summary of the key changes which may affect people here in Cumbria, Teesside and across the North of England. We hope you find this content useful and invite any questions you may have about how this could affect your financial plan, via:
t: 01228 210 137
e: [email protected]
Bonus for employers
Many people were furloughed since the announcement of the Job Retention Scheme in March 2020. Whilst workers will have likely appreciated having 80% of their monthly salary (up to £2,500) covered by the government in this time, many feared whether their job would still exist when the scheme was eventually wound down. The July Mini Budget offers some good news, in that employers will be given a £1,000 ‘bonus’ for each furloughed employee they bring back to work and retain until at least January 2021.
Cuts to VAT
During the UK lockdown, most sectors and industries were negatively affected. Yet among the worst hit were the leisure, travel and hospitality sectors. To try to inject life back into these important businesses, the Chancellor has announced a VAT cut from 20% to 5% for food and non-alcoholic drinks in restaurants, pubs and cafes. Hot takeaway food will also benefit from the cut as will attractions such as zoos, cinemas and theme parks. The cut is set to last until January 2021.
Easing of stamp duty
Another sector which was badly hit by the lockdown was the property market, as rules around social distancing kept house viewings and other essential activities from occurring. To try to bring momentum back into the property market, the Summer Statement also announced that the threshold for stamp duty on residential property would be raised from £125,000 to £500,000 in England and Wales.
This will be in place until the 31st of March 2021 and could result in as many as 90% of property transactions being free from stamp duty. As an example, if you take the average UK house price value in 2020 – £248,000 – and look at the impact, the new threshold results in about £2,500 saved in stamp duty.
The new threshold could go a long way towards lifting the UK economy and might make 2020 a good time to consider moving home. Not only could buyers potentially save four/five-figure sums on their stamp duty bill, but today’s low-interest-rate environment could also mean it is possible to find a good fixed-rate mortgage deal, potentially reducing monthly mortgage payments considerably.
Green initiatives
Have you been thinking about making your home more energy efficient? 2020 could be a good time to do it, with the Summer Statement announcing a ‘green homes grant’ of £5,000 per household for energy projects (e.g. insulation). Low-income households will be able to access £10,000, and the improvements could help increase the value of homes in future sales.
Young worker support
One of the key criticisms of the March 2020 budget was that many young people were unable to benefit from many of the government initiatives, particularly those on apprenticeships or trainee schemes. The Summer Statement has clearly made efforts to try to address some of these complaints through its ‘Kickstart scheme’, which offers £2bn to 16-24-year-olds to take up a 6-month placement. Employers will be offered £1,000 for each trainee they bring on board, and £2,000 will be granted for a new apprentice under 25 years of age.
Eat out to help out
Perhaps one of the most interesting policy announcements from the Chancellor concerned the government’s new plan to allow each person to claim 50% off in August 2020 (up to £10 per head) when eating at qualifying pubs, diners and restaurants, Monday to Wednesday. Although this is unlikely to make a huge dent in your household finances, it’s worth taking advantage of if you and your family are likely to eat out during the summer. When the VAT cut on food and non-alcoholic drinks is also factored in, this could see many of us take up the opportunity of a family treat. It’s also a good way to support the food and hospitality industries as they recover from lockdown.
Who is paying for this?
With so much money being pumped into the economy, over such a short period, many have asked how this will be repaid, and whether we might expect a return to austerity in the future.
Whilst nobody can predict this, the economic measures being implemented are on an unprecedented scale and fortunately in the short term, financing them is possible due to the extremely low cost of borrowing. However, we might not have to wait too long to know the answer to this question, as we may see a full Autumn Budget later this year, possibly generating some financial planning opportunities.
Invitation
The 2020 Summer Statement has some important announcements which could have considerable implications for many of us and our families.
If you would like to discuss your financial plan, please get in touch with your financial adviser here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
e: [email protected]