Due to the severity of the Coronavirus outbreak, Chancellor Rishi Sunak announced in today’s Budget a huge £30bn package of funding and measures announced to help businesses and individuals during what he termed a ‘temporary situation’.
He also managed to inject a little humour when he talked about the package of measures designed to boost jobs, quipping “I’m all in favour of jobs miracles given events of recent weeks”.
Below are our key points from the March 2020 Budget announcement, highlighted by our Group Managing Director, Rachel Sestini.
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1. Temporary tax breaks due to Coronavirus (CV)
Many of smallest businesses already pay no business rates.
The Budget will provide £3,000 cash grant per business for the smallest businesses – to reach up to 700,000 businesses and to help them cope with the expected disruption through Coronavirus.
Businesses’ tax payments can also be deferred through an extension of eligibility for Time to Pay.
The government also announced a new temporary Coronavirus bank scheme, where banks can offer loans to SMEs of up to £2m to support small businesses during this time and the worst of the crisis.
Shops, cinemas, restaurants will benefit from abolished business rates during 2020. Museums, art galleries, small hotels, gyms etc. that would not normally benefit from today’s measure aimed at the retail sector will benefit as the Chancellor is extending the 100% retail discount to them as well. This applies to travel and leisure companies with a rateable value below £51k.
“The best way to support people is to protect their jobs. We’re doing it by supporting businesses, Coronavirus will cost businesses money,” said the Chancellor. Businesses with fewer than 250 employees, will get a refund of sick pay for employees for up to 14 days to cover the period of isolation, whether or not employees show any symptoms.
The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.
2. Digital Services Tax
The government will introduce a new 2% tax on the revenues that certain digital businesses earn from 1 April 2020, to align their tax liabilities more closely with the engagement they have with the economy.
3. Corporation tax
Corporation tax will remain at 19%, still the lowest rate in G20 says Rishi Sunak. There is also more funding being committed to clamp down further on aggressive tax avoidance which the government will legislate in Finance Bill 2020-21 to take further action against those who promote and market tax avoidance schemes.
This includes a “new ambitious strategy [known as HMRC’s promoter strategy] for tackling the promoters of tax avoidance schemes. This will outline the range of policy, operational and communications interventions both underway and in development to drive those who promote tax avoidance schemes out of the market, disrupt the supply chain to stop the spread of marketed tax avoidance, and deter taxpayers from taking up the schemes.”
The government is also publishing a call for evidence in the spring on raising standards for tax advice. This will seek evidence about providers of tax advice, current standards upheld by tax advisers, and the effectiveness of the government’s efforts to support those standards, in order to give taxpayers more assurance that the advice they are receiving is reliable.
For large businesses, a special measure: from April 2021 large businesses will be required to notify HMRC when they take a tax position which HMRC is likely to challenge. This policy will draw on international accounting standards which many large businesses already follow. The government will consult shortly on the detail of the notification process.
4. Entrepreneurs’ Relief
“Entrepreneurs’ Relief is expensive, ineffective and unfair,” said the Chancellor “And it’s not entrepreneurs who mainly benefit.” However, he added that the government did not want to discourage genuine entrepreneurs, “we need more risk taking [in business]”, so the Budget takes what the Federation of Small Businesses called a “sensible reform”, moving from £10m lifetime amount to £1m. The Chancellor estimates that this will only affect around 20% of people using the scheme.
5. Other tax relief and incentives
“We need a thriving private sector to drive growth and create jobs. We want to unleash the power of business to start up, grow and export,” declared the Chancellor in today’s Budget speech.
“Achieving the government’s ambitions on R&D will require investment from the private sector,” he added. To boost that investment the government will increase the rate of R&D tax credits and consult on widening the definition of qualifying expenditure to include data and cloud computing. The rate of Research & Development Expenditure Credit will increase from 12% to 13%.
Measures announced today included extending start up loans, additional monies for growth hubs and life sciences, new export loans, and dedicated trade envoys worldwide.
The Budget sets out plans to increase public R&D investment to £22 billion per year by 2024-25. The government will invest that money in the people, ideas and industries that will cement the UK’s world-leading position in science and technologies ranging from nuclear fusion to electric vehicles and life sciences.
Supporting enterprise is an important part of the government’s ambition to level up opportunity across the UK. The government will do this directly by extending the funding of the British Business Bank’s Start-Up Loans programme to the end of 2021-22, supporting up to 10,000 further entrepreneurs across the UK to access finance to start a business.
The government is cutting taxes on employment by increasing Employment Allowance by a third, to £4,000 with the Chancellor describing this as “another step towards the dynamic, low cost economy we want to see.” The government says this will benefit 510,000 businesses.
Today’s speech also saw Rishi Sunak announce that he is launching a fundamental review into the long-term future of business rates, with more detail to be announced in Autumn Budget.
6. Personal tax
The Budget also announced that HMRC will launch new interactive guidance in summer 2020 which will make it easier for self‑employed taxpayers to navigate the tax system.
The 2020/21 personal allowance is set at £12,500 as expected. For those in England and Northern Ireland the higher rate of 40% is payable on annual earnings from £37,501 to £150,000 – and the additional tax rate of 45% is payable on annual earnings above £150,000.
7. National Insurance
The Budget confirmed that the National Insurance threshold will increase from £8,632 for 2019/20 to £9,500 for 2020/21 – a tax cut for £31m people.
The lifetime allowance will be increasing for 2020/21, rising to £1,073,100.
For high earners, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020.
In welcome news for doctors and undoubtedly as a result of the Coronavirus situation, the Budget sees the level of the tapered annual allowance threshold move from £110,000 to £200,000. This will allow health workers, particularly consultants and other senior doctors, to stop capping their working hours.
9. Stamp Duty Land Tax
In unwelcome news for people outside the UK investing in UK property, the Chancellor announced a new ‘Non-UK resident Stamp Duty Land Tax (SDLT) surcharge’ of 2%. This applies to non-UK residents buying residential property in England and Northern Ireland from 1 April 2021.
If you’d like to discuss any of the changes and how they might affect you, please contact us:
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