Your Business & the Budget 2020

The Chancellor, Rishi Sunak, has unveiled his inaugural Budget in a speech to the House of Commons. So, we’ve taken a look at how the Budget will affect you and your business.

The ‘Coronavirus Budget’?

As expected, it was a Budget dominated by Covid-19, and the Government’s plans to combat the virus. Last week, Mr Sunak told the BBC that the NHS would get ‘whatever it needed’ during the international crisis.

Earlier, the Bank of England announced an emergency cut in interest rates – from 0.75% to 0.25% – as they try and reduce the financial impact of Coronavirus on the UK economy.

While permanent employees and umbrella contractors can benefit from statutory sick pay, many contractors, freelancers and small business owners do not have that ‘luxury’.

It’s a legitimate concern that ‘gig economy’ workers would risk going into work rather than self-isolating in order to make ends meet. In response, the Chancellor has today declared a number of measures to support these people:

  • £30bn fiscal stimulus to support British businesses through Coronavirus.
  • Sick notes and one-to-one benefits interviews have been temporarily waived
  • Universal Credit and Employment & Support Allowance (ESA) are available more “quickly”
  • The cost of sick pay for up to 14 days – for businesses with fewer than 250 employees – will be refunded by the Government

Cashflow is always a concern, particularly for small businesses, and particularly in anticipation of a potential loss in supplies, trade, and/or personnel that could be brought on by something like Covid-19.

The Federation of Small Businesses had already called for the Treasury to support small businesses through the Coronavirus outbreak by introducing more targeted measures – such as interest free loans – and allowing small businesses to spread their tax payments more evenly.

Help is also available through the ‘time to pay’ arrangements, which is to be ‘scaled up’ with the availability of a further 2,000 members of staff to support firms where needed.

Rates & Allowances

Last month, we brought you the news that the National Living and National Minimum wages were to increase – which was reiterated in Wednesday’s speech. The Chancellor also announced that the tax threshold for Employees’ National Insurance contributions is to rise from £8,632 to £9,500. This will primarily affect employees and small business owners, who can now earn more before they start paying National Insurance.

Meanwhile, the Employers’ National Insurance threshold has increased slightly from £8,632 to £8,788. The Employment Allowance has also increased. So, most small businesses will now get the first £4,000 of their Employer’s National Insurance bill free, rather than £3,000 as it was previously.

The Income Tax bands will remain the same. That means the Personal Allowance stays at £12,500 and the higher rate tax bracket at £50,000.

The flat rate deduction for home working – commonly known as the ‘Use of Home’ Allowance – has risen from £4 to £6 per week. This represents a small tax saving for those eligible.

Corporation tax was initially set to reduce to 17% from April 2020, but the Chancellor has announced that it will instead remain at 19%.

IR35

The review into the Private Sector’s off-payroll working rule changes has now concluded. As expected, the changes will be legislated in the forthcoming Finance Bill and will be implemented on April 6th 2020. For more information on IR35 and how you can prepare, click here.

VAT

Somewhat surprisingly, there weren’t too many changes in relation to VAT in Wednesday’s Budget. There’ll be a consultation on how VAT works in relation to the Financial Services industry. And, VAT on digital / e-publications, including newspapers, books and journals will be brought in line with their paper counterparts and reduced to 0%.

SME’s

In his speech, Mr Sunak promised a £3,000 cash grant – per business – for any firm that’s eligible for the small business rates relief. The measures represent a ‘£2bn cash injection for 700,000 small businesses.’

Furthermore, the Government is to ‘abolish business rates’ for small venues and shops for one year from April 6th 2020. So, businesses like cafes, gymnasiums, food outlets and concert venues – with a rateable value of less than £51,000 will pay NO business rates. This could save such businesses around £21,000. It’s a move that’s been welcomed by many in industry, giving companies the opportunity to focus on paying employees without worrying about their business rates.

Mr Sunak also announced a £130m extension for new start-up loans.

Along with the decrease in interest rates, the Bank of England announced additional measures to support the UK’s SME (small & medium-sized enterprise) network.

Central Bank reserves will help finance funds for those banks that increase lending for SMEs. According to Sara White from Accountancy Daily, this additional funding is designed to “incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption. It will also provide “additional incentives for banks to support lending to SMEs that typically bear the brunt of contractions in the supply of credit during periods of heightened risk aversion and economic downturns.”

The Budget: Five Fast Facts

  1. ONE DOWN, ONE TO GO: This is the first of two Budgets scheduled for this year. Today’s announcement, delayed from November following campaigning for the General Election, usurps the usual Spring statement. There will be another Budget speech delivered in the Autumn. Last year was the first with no Budget for more than a century.
  2. NEW TO THE JOB: Today’s Budget is the first for new Chancellor, Rishi Sunak. Mr Sunak only replaced his predecessor, Sajid Javid, last month, and has had just over four weeks to prepare. Mr Javid, who resigned in February’s reshuffle, is one of only two Chancellors never to deliver a Budget. The other? Iain Macleod, who passed away shortly after his appointment in 1970.
  3. ON THE CLOCK: Rishi Sunak will deliver his Budget speech this lunchtime, at around 12.30pm, with his speech lasting approximately one hour. There is, however, no time limit for his statement. Though, he’ll have to go some way to match the record for the longest Budget speech delivered to the House of Commons. For those wondering, it was William Gladstone back in 1853… a whopping 4hrs, 45mins!
  4. WHAT’S IN THE BOX?: Talking of Gladstone, the Budget briefcase we see today is inspired by that which was made for him in 1860. That specific attaché was actually used continuously for the next 105 years, until James Callaghan introduced his ‘brown valise’ in 1965. It wasn’t long before the scarlet box got reintroduced.
  5. DRINK IT OR TAX IT?: When delivering the Budget to the Commons, the Chancellor is given special dispensation to drink alcohol! However, this ‘privilege’ rarely gets acted upon; in fact, the last person to do so was one Kenneth Clarke with his glass of Whiskey way back in the mid-1990s.

Entrepreneurs’ Relief

Following rumours of its potential abolishment in recent days, we welcome the Chancellor’s announcement that Entrepreneurs’ Relief has been reformed rather than removed. The lifetime allowance, though, will be reduced from £10m to £1m.

Capital Gains Tax

From next month, you’ll have a maximum of 30 days to report and pay Capital Gains Tax to HMRC on the sale or disposal of certain residential properties in the UK. This excludes those for whom their property has been their main / only residence for the entire period of ownership.

The changes, which come into force on April 6th, will predominantly affect landlords with buy-to-lets and those with second homes.

If Capital Gains Tax applies to the property you’re selling / disposing of then, by the end of the new ‘30 day’ period, you must:

  1. Calculate any gains you’ve made on the property
  2. Report that figure / estimate to HMRC
  3. Make your Capital Gains Tax payment to HMRC

And finally…

  1. £5bn is to be spent on ensuring gigabit-capable broadband is accessible in the hardest-to-reach places.
  2. A Stamp Duty surcharge for buyers of property in England & Northern Ireland, who are non-UK residents, is to be levied at 2% from April next year (2021).
  3. The Research and Development expenditure credit has increased from 12-13%.
  4. The Government will launch a new, temporary, ‘Coronavirus Business Interruption Loan Scheme to support businesses to be able to access bank lending and overdrafts.
  5. And, amidst the turmoil of Coronavirus, Brexit and stock market slumps, piece of mind at last about the nation’s pothole problems.

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