Budget 2020: Key Points for Business Owners, Contractors and Investors
It was inevitable that Rishi Sunak’s first Budget would be dominated by coronavirus. But the £30bn of coronavirus-related fiscal stimulus is by no means the whole story in what is already being billed the biggest giveaway in decades.
From temporary sick pay rebates through to a huge shakeup of entrepreneurs’ relief, here’s a rundown of the changes and what they mean for you…
Sick pay refunds. Businesses with fewer than 250 employees will see statutory sick pay refunded for a limited period.
Cash grants. Firms that are eligible for the small business rates relief will be able to access a £3,000 cash grant.
Coronavirus loan scheme. The government will effectively underwrite ‘business interruption’ bank loans of up to £1.2m to small and medium-sized businesses to cover the cost of salaries and overheads.
Business rate suspension. Businesses with a rateable value of less than £51,000 in the retail, leisure and hospitality sectors will not pay any business rates in the coming year. (The whole system of rates is due to be reviewed later this year).
The Chancellor has kept the Corporation Tax rate at 19%.
Duties and ‘green’ taxes
Fuel duty is frozen. The same goes for duties on spirits, beer, cider and wine.
Red diesel subsidies for most sectors (excluding farmers and rail operators) will be scrapped in two years’ time.
Plastic packaging tax is due to come into force from April 2022.
Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne.
VAT on digital publications, including newspapers, e-books and academic journals to be scrapped from December.
CONTRACTORS AND EMPLOYEES
SSP - Employees who are advised to self-isolate will be entitled to statutory sick pay from day one, even if they do not have symptoms.
Self-employed and contractors. There were some calls for the right to SSP to be temporarily extended to self-employed workers. This has not happened. However, the right of self-employed workers to claim contributory Employment Support Allowance has been extended to the first day of absence (as opposed to having to wait a week to claim).
The tax threshold for National Insurance Contributions will rise from £8,632 to £9,500. For the average worker, this amounts to an annual pay bump of £85.
From 6 April this year, changes to the off-payroll working legislation (IR35) impacting large and medium-sized private sector organisations come into force. These changes effectively shift the responsibility for determining a worker’s employment status from the contractor to the hirer. They are also likely to mean that many more workers will fall under the IR35 umbrella.
Contractors, small business accountants and politicians alike have all expressed concerns about IR35, with reports that many employers and contractors are simply not prepared for it.
Anyone hoping that the Budget would mark a policy rethink will be disappointed. The chancellor was silent on the matter in his speech, although written documents accompanying it confirmed that the changes will go ahead as planned.
This is one of those tax breaks that suffered from a really bad press, and many suspected that its abolition was on the cards. As it happens, the relief has not (yet) been scrapped - although it has been severely curtailed.
Entrepreneurs’ Relief reduces the level of capital gain tax company founders pay when disposing of shares in their company from 20% to 10%. It was meant to encourage innovation and risk taking, but the popular perception was that it was merely making rich people slightly richer, with no real spur to genuine entrepreneurship.
As such, the amount claimable under the relief has been slashed from £10m to £1m during the individual claimant’s lifetime.
Stamp duty for overseas investors
There were no nasty surprises for buy-to-let landlords, save for a higher-than-expected stamp duty hike for buyers from overseas.
The Chancellor announced a 2% surcharge on non-UK residents purchasing residential UK properties. This applies to individuals as well as those buying through a company. Note that this is on top of regular stamp duty fees and is in addition to the 3% surcharge applicable to buyers who already own a home.
With any Budget, the devil is in the detail. Especially when it comes to the relief available to businesses and individuals in response to the coronavirus update, it remains to be seen just how easy it is going to be to access assistance in a timely manner.
As small business accountants, we especially welcome the steps announced by the Chancellor to scale up HMRC’s ‘time to pay’ service - along with a new HMRC helpline 0800 0159 559, open for businesses and self-employed workers questions regarding due or late payment of tax due to coronavirus related issues.
Also, if you want to explore ways to future-proof your business finances, streamline your accountancy and payroll services or get tailored advice on Entrepreneurs’ Relief, give us a call or contact us below.