The 2020 Budget – what you need to know
With a turbo-charged Junior ISA allowance and cuts to interest rates, both the Chancellor and the Bank of England made several changes that will affect ISA savers.
In the first Budget following December’s Conservative electoral victory, Chancellor Rishi Sunak laid out a suite of new measures designed to boost the UK economy over this uncertain period. With a commitment to support the NHS with “whatever it needs, whatever it costs” and a “bridge” for small and medium-sized businesses, the Chancellor turned on the spending taps to the tune of £30 billion.
Other Budget announcements included cancelling the planned increases in fuel duty as well as spirit duty.
On the same day, the outgoing governor of the Bank of England, Mark Carney, announced that interest rates will be cut from 0.75% to 0.25%. Furthermore, he said that the Bank would make billions of pounds available to help banks support businesses under pressure from the outbreak of the Covid-19 coronavirus.
What the changes announced could mean for ISA savers:
Interest rate cuts – good news for borrowers, not so good for savers
Lower interest rates are good news for borrowers, who may be able to access loans and mortgages at more favourable rates. Those with ‘tracker’ mortgages – which are designed to move with interest rates –may benefit from lower monthly payments.
However, for cash savers this news will be less welcome. Savers have already seen years of low returns from Cash ISAs or savings accounts and so it may be a long time until higher savings rates are offered. However, those with fixed rates will still continue to receive the headline level of return.
The amount you can contribute to a Junior ISA each year has more than doubled
The available annual contribution to a Junior ISA was increased from £4,368 to £9,000. It may not have made the Chancellor’s speech but this is great news for those putting money aside for their children or grandchildren’s future.
Any child under the age of 18 who is a UK resident can have a Junior ISA and these can be a useful way to save for tuition or university fees or even for a deposit on a house.
Find out more about our Junior ISA. Please remember the value of your child’s investment may fall as well as rise and is not guaranteed. This means it may be worth less than the amount invested.
The National Insurance threshold rose from £8,632 to £9,500
This tax break was promised in the Conservative election manifesto so it’s not a total surprise to see it confirmed here. Currently, employees and the self-employed pay contributions after an equivalent salary of £8,632. Now, with the payments only kicking at £9,500, this will mean those employed may save an extra £100 a year on their tax bill.
Adult ISA allowances left unchanged at £20,000
The adult ISA allowance remains unchanged at £20,000 so Stocks & Shares ISA investors can continue to take advantage of the generous ISA tax benefits.
You can also split your annual allowance across different types of ISAs. For example, you could have £10,000 in a Stocks and Shares ISA, £6,000 in a Cash ISA and £4,000 in a Lifetime ISA (providing that you’re eligible to open one).
Remember, your annual allowance is on a ‘use it or lose it’ basis – you can’t carry it over into the next tax year! The 2019/2020 tax year is about to end on 5 April so if you’re planning to save, do it soon to beat the deadline.
Open an ISA with us, or if you already have an ISA with us, you can add to your investments through My Account. Please remember the value of your investment may fall as well as rise and is not guaranteed. This means it may be worth less than the amount invested.