The Budget 2020 was announced on 11 March by the new Chancellor, Rishi Sunak. The budget was highly anticipated by small businesses, especially as the country is now embarking on a new era post-Brexit. The Budget was by no means business as usual and the government’s response to the coronavirus took centre stage. Here is an outline of what small business owners must know about the Budget.
Coronavirus measures introduced
The focus on the Budget revolved around the government’s response to the coronavirus outbreak. In terms of businesses and the self-employed, the important announcements were:
- Statutory Sick Pay will be available for all those advised to self-isolate – even without symptoms.
- Benefits for the self-employed will be available from Day 1 and minimum income limit for Universal Credit temporarily removed – no requirement to visit Job Centres.
- Government to fund SSP for two weeks for businesses with fewer than 250 employees.
- SMEs can access a coronavirus loan scheme to cover SME bills.
- A cash grant of £3,000 for businesses eligible for small business rates relief.
- Business rates for small shops abolished for the year.
More information can be found on the official government guidance package. It is also worth noting that while the business tax rate changes are only going to be in place for the current year, the Chancellor did announce a review into the rates later this year.
Earlier, the Bank of England also announced an emergency cut on interest rates and the launch of a new Term Funding Scheme. Both the Budget and the Bank’s scheme aim to limit the impact the virus might have on the economy and SMEs.
Increasing National Insurance threshold
The National Insurance threshold is set to rise to £9,500 in 2020/21. For the self-employed, this works out as an £85 tax cut and according to the Institute for Fiscal Studies (IFS), this means 500,000 people will no longer need to pay the tax.
Reducing the Entrepreneurs’ Relief
There had been plenty of rumours about the previous Chancellor, Sajid Javid, possibly wanting to scrap the Entrepreneurs’ relief altogether. Currently, the relief lets business owners pay just 10% Capital Gains Tax when selling their business. While the new Chancellor didn’t scrap the relief, he did announce changes to it. The Budget included a change to reduce the lifetime limit from £10 million to £1 million. The measure will not have much impact on SMEs and is largely just targeted at the biggest businesses.
Increasing R&D Tax Credit
The new Budget 2020 also included an increase in R&D investment. The government’s goal is to increase R&D investment by £22 billion a year by 2024/25. Furthermore, the government will increase the rate of R&D Tax Credits, as well as consult on widening the definition of qualifying expenditure to include things like data and cloud computing.
New funding for business loans
The Chancellor is also boosting business investment in other ways. The Budget announced £130 million of new funding for business loans together with a £200 million of additional funding for the British Business Bank. This funding is aimed at scale-ups and start-ups.
Announced investments across the board
Furthermore, Budget 2020 had many new investment measures that could have an impact on SMEs. The Budget included the following measures:
- Additional funding for different parts of the country – £640 million for Scotland, £360 million for Wales and £210 million for Northern Ireland.
- £27 billion on roads across the country.
- £5 billion of funding invested in gigabit-capable broadband.
- £1.5 billion for further education.
Introduction of new environmental measures
Businesses will also need to keep an eye on the new environmental measures. These include:
- Increased taxes on pollution.
- Abolishment of tax relief for red diesel for most sectors with agriculture, rail, fishing and domestic heating to stay exempt.
- Charge on any packaging with less than 30% of recycled content.
Big taxes remained the same
When it comes to the Budget, it isn’t always about the things that are changing. It also matters to pay attention to what remains the same. The Conservative manifesto pledged to keep income tax, VAT and national insurance untouched in terms of increases and the Budget delivered on this.
It is worth noting that VAT will be scrapped for digital publications from 1 December, including books and newspapers.
Changes to IR35 to go-ahead
Another major talking point ahead of the Budget has been the government’s introduction of new off-payroll rules in the private sector. As already mentioned in our previous blog post, HMRC tweaked the rules and there is a further House of Lords inquiry into the changes. The Budget did, unsurprisingly, announce that it would be making changes to the introduction of the rule. However, these will come into effect on 6 April 2020 as previously planned.
Get more information about the Budget 2020
While the Budget doesn’t tend to reveal any immediate changes, it is good to be aware of the government’s direction. The new Budget 2020 has some interesting points for small business owners and preparing your business for the upcoming changes is important – especially in the current uncertain climate.
The above should help you know the main points about what is ahead next year. If you want to talk more, don’t hesitate to contact us. At Devonshire Green, we know the impact minor changes can have on small businesses and with our expertise, you can adjust to whatever lies ahead. Contact us today and let’s talk more about your small business’s future.