On 11th March the newly-appointed Chancellor, Rishi Sunak, took to the stand to deliver the 2020 Budget. Less than a month into the job, at the centre of a global health crisis, the plans for Brexit not exactly firmed up and pressure from number 10, Mr Sunak had his work cut out.
Chris Downing, Director at South Coast accountancy firm, Inspire, sets out his response to the budget and advice for businesses.
“Even before the highly-anticipated budget began, the Bank of England this morning announced an ’emergency’ reduction in interest rates from 0.75% to 0.25% – taking the costs of borrowing back to the lowest in history.
“The speech started with a specific package of measures for the ever moving Covid19/Corona position. He then did qualify all subsequent figures were pending the impact of Corona so there is an element of guess work involved in all of the below. Even then, he acknowledged we are heading into a position of having no momentum to ride out the short term effects. He was however then strangely short on economic data and talking around the public debt etc. So, one wonders if this absence of data is actually about measuring things at the end of the parliament rather than year on year, or being unsure of the impact of the disruption on the economy.”
Here’s how the key announcements will impact business:
Covid 19 / Corona
- Overall a £30bn package of measures set aside if needed, with £5bn for public services
- Businesses with <250 employees can get a full SSP reclaim up to 14 days
- 2,000 additional HMRC Staff to help man a dedicated Time to Pay support line (although, where from is not clear as they are stretched already)
- New Government backed facilities via banks for emergency loans
- Reductions in business rates for rateable values of less than £51,000, for sectors such as retail and leisure
- Hardship funds for local authorities dealing with vulnerable people.
The Economy (as above – all figure pre Covid19/Corona impact)
- GDP growth will be slow, at 1.1% this year, 1.8% for 2021, 1.5% 2022, 1.3% 2023 and 1.4% 2024
- The Government will run a surplus at the end of 2024, considerably extending the target which was originally 2020
- Debt will be lower at the end of the parliament than at the beginning – 79.5% of GDP currently, vs 75.2% in 2024. Not as quick or as large a reduction as previously
- Inflation is forecast at 1.4% for 2020, 1.8% 2021 and 2% thereafter.
Tax and National Insurance
- Changes to Entrepreneurs Relief – the rate of 10% tax will now only apply to the first £1m of gains made when selling a business, rather than £10m previously. This is effective immediately
- The corporation tax drop which was planned to be 17% from April 2020. This reduction was shelved during the election and was confirmed today. Corporation Tax will stay at 19%
- R&D rebates will increase from 12% to 13% for ‘large’ businesses
- Employment allowance to change from £3,000 to £4,000
- The National Insurance threshold before Employees pay NI will rise from £8,632 to £9,500 from April 2020
- Plastic packaging tax from April 2022
- Pension allowance changes for higher earners, but still a max of £40k can be contributed per year.
Other economic measures
- Fuel and Alcohol duty frozen
- A package of measures for Green research and initiatives, but;
- £27bn into roads and rail over the parliament
- VAT on Women’s sanitary products to be scrapped 1 January 2021
- SDLT surcharge for non UK resident buying property in the UK
- Books and printed materials to have a 0% VAT rating.
To find out more, or for further advice, please contact one of the Inspire Advisory team on 01202 717867