Bold & Boozy Budget 2020 for Business
Budgets delivered by Philip Hammond were criticised by some for being too timid in their approach toward investment but that cannot be said about Rishi Sunak’s Budget 2020, which set out the direction of travel for this new government during the backdrop of COVID-19. New pledges were heaped on thick and fast, with the phrase “getting it done” still ringing in our ears.
Sunak announced that the Office for Budget Responsibility (OBR) thinks the plans “will be the largest sustained fiscal boost for nearly 30 years”. Sunak called in a new era, with the freedom and resources to invest in our future. This was quickly rebutted by opposition which said that the measures only return us to levels before the Conservatives took office in 2010.
Budget 2020 was intended to provide economic security for businesses, the homeless, families, the NHS, education and workers and was packed with multi-million and billion-pound announcements across almost every governmental department – with a fleeting mention for social care in the midst.
If you missed the speech, here are some of the announcements which we feel are most likely to affect our clients.
Lots of stats in this bit but worth noting the inflation forecast offered some hope for consumers in the years to come, starting at 1.4% in 2020, increasing to 1.8% in 2021 then dropping to remain on or around target in the years that follow.
Protections for workers
Sunak addressed COVID-19 early on. He admitted that one-fifth of workers could be off work at any one time and global supply chains would be affected. This would have a “significant” but temporary impact on the economy.
For those who can’t work, the government is willing to step in to support their finances. It has already announced that sick pay will be paid from day 1 rather than day 4. The Budget went further to say that sick pay (a relatively low amount but better than nothing) will be available for those not presenting with symptoms and that sick notes can be obtained by calling 111.
Self-employed and gig economy workers were provided with some clarity: the government will make it quicker and easier to access benefits, with complementary support allowance provided from day 1 not day 8. Alongside this, the minimum income floor for claiming Universal Credit will be removed, and again, everything can be done by phone or online. This equates to an approximate £500m boost for the welfare system.
A £5 million hardship fund to local communities will be provided to help cope with the fallout from COVID-19, while the increase of the Employment Allowance from £3000 to £4000 was positive news for workers.
Next up were measures to protect jobs and the cost of self-isolation for business. The government will refund businesses with fewer than 250 staff providing statutory sick pay for up to 14 days, at an overall cost of around £2 billion.
HMRC will scale up its Time to Pay service to defer tax payments over a calculated time period, with more staff to manage cases.
The Budget recognised that good businesses would have a problem with cash flow at this time. A new temporary COVID19 business interruption loan scheme was announced, with the government covering up to 80% of losses with no fees so that banks can lend with confidence.
The Budget amended the tax system so that shops, restaurants and other outlets with a rateable value of £51K will have their business rates abolished altogether. No mention of offices.
Tens of thousands of other businesses, such as hospitality, are not covered by existing policy. This year, the above will extend to any eligible property with a rateable value under value £51K of rateable value. In the next 12 months, its estimated almost half of businesses will not pay rates.
Support for the smallest businesses came in the form of a £3,000 grant per business to provide an immediate cash boost. Taken together, this adds up to £7bn support for the self-employed, businesses and the vulnerable.
In addition, to encourage employment the current £3,000 employers allowance against Employers NIC contributions was increased to £4,000 – although the size of businesses eligible has been restricted (employers NI annual cost of less than £100k)
Finally, £130m of new funding was allocated to extend Start-up Loans for new businesses.
Unleashing the power of business was next. The government will provide a raft of measures, including £130m of new funding to extend start-up loans, £200m in the British Business Bank to scale up business, £200bn in life sciences, £5bn export loans for business and dedicated trade envoys representing the North, Midlands, Wales and West England in embassies around the world.
Many had predicted that Entrepreneurs Relief would be scrapped altogether, but instead, it will be reformed by reducing the lifetime limit from £10m to £1m, so 80% of SMEs will be unaffected by the changes. This will save £6bn a year which will go back into business.
Finally, as heralded in the general election, the Corporation Tax Rate will remain at 19%.
This April, two million workers on the Living Wage will see their pay rise by 6.2%. As a result, full-time workers can expect a pay boost of almost £1,000 a year.
A week after, the National Insurance limit will rise to £9,500, which will mean a tax cut for almost 31 million people, saving around £100 per head in the process.
Restrictions to pension contributions changed, primarily to retain more doctors working extra hours.
Junior ISAs will now include tax-free savings for children with savings limit of £9000 from April – up from £4,368.
Your employer can now pay you up to £6 a week (up from £4) to cover your additional costs.
The much-maligned ‘tampon tax’ will be abolished but not until January 2021.
Those working in the media industry responded favourably to the news that VAT on eBooks will be abolished in December 2020.
Research & Development
R&D investment will increase by £22bn per year which is higher than the US, China and Japan. Next year, funding in this area will grow by 15% with detailed allocations set out during the spending review.
Budget 2020 did drill down into a few commitments: £1.4bn for the Science Institute at Weybridge, £900m for nuclear fusion, space and electric vehicles and £800m for a Blue Sky fund, modelled on a similar programme in the USA.
Research and Development expenditure credit will increase from 12 to 13%, which equates to a tax cut worth £2,400 on a typical R&D claim.
Benefits were dished out to the British drinks industry. Scotch Whisky will be allocated £10m R&D funding to go green and a further £1m to promote Scottish food and drink overseas.
Planned increases in spirits duty will be cancelled this year and the planned rise in beer, cider and wine duty. In fact, every single alcohol duty will be frozen.
Pubs received a special mention, answering calls to slow the rate of closures across the UK. After deliberation, the business rate discount for pubs will go up from £1,000 to £5,000.
Freezing fuel duty has come at a cumulative £110bn cost to the taxpayer, but it was felt that this was not the right time for a fuel hike, so it remains frozen.
Tax relief for red diesel will be abolished in two years but specific industries like fishing and agriculture will be exempt.
Budget 2020 Summary
Budget 2020 was packed with reliefs, funds and initiatives but no ‘revolutions’ in the world of VAT, Paye, income tax NI and corporation tax. Now is the time to work with the Cardens team who understand the myriad of available business and employment support systems. Call us on 01273 739592 to book your free consultation.