We’ve sat down, ignored the political posturing and digested today’s Budget statement to focus on the key areas that will impact your business and personal wealth. But, was this really a Budget to ‘get things done’?
Today, the Chancellor ‘splashed the cash’ but how much of it benefits business? Read on to understand which of today’s announcements will have the biggest impact on you and your business.
The Chancellor acknowledged that Coronavirus was a key challenge but not the only challenge facing the country. However, with it likely that a fifth of the workforce will be off sick at any one time, the Chancellor announced a package of measures to help individuals and ”provide a bridge” for businesses.
The Bank of England’s measures to mitigate the impact were announced earlier and are:
- 50 basis point reduction to bank rate back to 0.25%
- Freeing up of £100bn of extra lending power to help banks support SMEs
- Relax financial regulations to help lenders put an extra £200bn of credit into the economy
This is the headline but in reality the big question is, how can SMEs access it?
The Chancellor announced that employees who self-isolate will be eligible to claim SSP from Day one, rather than Day four, irrespective of symptoms. Employees with be able to obtain a sick note via the NHS 111 phone service. For businesses with fewer than 250 employees, the cost of providing SSP for up to 14 days due to coronavirus, will be refunded by the Government in full.
On one hand, this approach is a prudent measure to manage the crisis, however, it’s likely to contribute to greater employee absence which, for labour intensive businesses, impacts productivity and ultimately cashflow.
Mr Sunak announced a scale up for the time to pay service to defer tax payments, however, in our experience this continues to be difficult to access. Whether the additional 2000 helpline staff makes it more accessible, remains to be seen.
The Conservative Party had pledged to reform Entrepreneurs’ Relief, but rather than abolishing it, Mr Sunak took measures to cut back on the tax relief by reducing the lifetime limit from £10m to £1m, creating a £6bn saving for the Government over 3 years. This takes the rate back to where it was 12 years ago when it was introduced. Whilst this doesn’t affect 80% of business owners, the impact will be keenly felt, particularly by businesses with sole shareholders.
Enterprise Management Incentive (EMI) scheme
Although the Chancellor didn’t mention the EMI scheme in his speech, according to the Red Book the scheme will be under review. Although there is no detail currently this is one to watch.
Research & Development (R&D)
Research and Development Expenditure Credit (RDEC) will be increased from 12% to 13% for expenditure incurred on or after 1st April 2020. This will only affect larger businesses or those who can’t take advantage of the SME scheme.
Under the SME R&D scheme, the re-introduction of the PAYE cap has been delayed until April 2021. This will benefit those businesses with smaller wage bills by allowing them to continue to claim the repayable credit.
Mr Sunak was expected to end the freeze on fuel duty in a bid to get the country on track for its carbon emission goals, but instead he kept the freeze in place, which is good news for businesses with large fuel bills. There were strong signals from the Chancellor that this will be removed in the future so businesses should plan for this.
In the Tory manifesto, there was a pledge to increase the threshold for National Insurance payments to £9,500, which impacts more than 31 million workers across the UK. The Chancellor delivered on this promise today but didn’t commit to raise it further in the future.
The Employment Allowance will be increasing from £3,000 to £4,000 which is a cost saving for small businesses.
By 2024 the national living wage will increase to over £10.50 per hour, however, there was already a planned rise to £8.72 an hour from April 2020.
This is good news for employees, however, for certain sectors it will mean a large increase in wage bills with a need to pass on the cost to the consumer.
Moving to pensions, the Chancellor said that the tapered annual allowance thresholds will be increased by £90,000 to £200,000. At the same time, people on the highest incomes will see the minimum amount the annual allowance can reduce to fall from £10,000 to £4,000. This change was announced in the context of the additional work that senior NHS staff would need to do with regard to the coronavirus and it seemed initially that this would be limited to NHS staff, however, further guidance has indicated that this may be open to everyone.
There was some good news for the retail, leisure and hospitality sectors as the Chancellor abolished business rates for businesses within those sectors with an annual rateable value below £51,000.
Small businesses that don’t pay rates will get a £3,000 cash grant per business. This is likely to impact 700,000 small businesses across the UK.
Business rates discounts for pubs to rise from £1,000 to £5,000.
Today, the Budget was dominated by coronavirus and the question is where would the Budget have been without coronavirus and where would coronavirus have been without the Budget?
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