Yesterday was a big day for the UK economy when Chancellor Rishi Sunak delivered his first budget in the House of Commons. The results appear to have been very well received with the Chancellor announcing huge increases in public spending to boost the UK economy in the midst of the COVID-19 (Coronavirus) outbreak. This article details the main points that will impact small business owners over the coming year.
With more and more people being told to self isolate as a result of the current virus outbreak, it is only natural that small businesses would suffer. Statutory sick pay (SSP) is not a statutory payment that is reimbursed by the Government, and hence small businesses would be forced to bear the brunt of the cost. The Chancellor agreed that small businesses should be supported in this current time of need and as a result he announced that:
- Companies with fewer than 250 employees are now entitled to reclaim SSP paid out to employees who are self isolating as a result of COVID-19 (Coronavirus) concerns for the first 14 days of sickness.
- Self employed individuals who aren’t entitled to claim SSP will be entitled to claim Employment Support Allowance (ESA) payments from day 1 of their sickness / self isolation, instead of having to wait until day 8 like they would have to under the current rules.
A number of changes were announced in relation to business rates, with the most interesting being:
- Businesses who are currently entitled to small business rates relief will be given a one-off cash injection from the Government of £3,000. At the present time it’s not known how you can apply for this, but as soon as we have more information we will certainly share it with you.
- Business rates for businesses in the retail, leisure and hospitality sectors with a rateable value of £51,000 or less will be abolished entirely.
The Chancellor confirmed that the current personal allowance and higher rate threshold will remain unchanged at £12,500 and £50,000 as we enter the new tax year. He did however confirm the following changes:
- National living wage to increase from £8.21 to £8.72, which is a huge increase of 6.2%
- The class 1 national insurance threshold for employees will increase from £8,632 to £9,500 , meaning that employees will on average be £85 a year better off.
Although we were told in previous years that corporation tax rates would decrease to 17% for the 2020/21 tax year, the Chancellor has announced that the rate will remain static at 19%. This is still lower than the majority of our neighbouring nations, so not an entirely negative move here.
Allowances and Reliefs
Great news for employers. The employer allowance has been increased from £3,000 to £4,000 which means that you can increase staff salaries or take on more staff without a big increase to your additional employment costs.
Although there was much pressure for the Chancellor to abolish the current Entrepreneurs Relief entirely, he decided to keep the relief in play, but reduce the lifetime allowance from £10m to £1m.
A variety of VAT changes were announced yesterday, and here is a brief summary:
- VAT on tampons is to be completely abolished from 2021, meaning that they are no longer categorised as a luxury item.
- VAT on digital publications including books and magazines will be abolished from December 2019, which brings their tax treatment in line with their physical counterparts.
One of the Chancellors biggest announcements was that he has granted additional funding to HMRC to investigate tax avoidance schemes and to recoup underpaid tax from the current tax paying population. This is a big message to send out from this Government to let us know that they mean business when it comes to collecting the tax that is owed.
Overall this budget, in my opinion, is exactly what the UK economy needed right now. Although some expected tax breaks were not granted, the increase in public spending and cash injections back into small businesses will be very well received.
If you would like more information on how yesterday’s budget announcements directly affect you and your business then please don’t hesitate to contact us on 01634 540340 or firstname.lastname@example.org