Not only have we had the news that interest rates have been cut from 0.75% to 0.25% today, Rishi Sunak has also delivered his first Budget, which we’ve been awaiting with interest.
It’s the detail that is important, not just those few points that make the headlines. So, here is our summary of the key points for business owners.
Budget Summary for Business Owners
The main income tax and corporation tax rates and thresholds remain unchanged.
We’re pleased to see that Entrepreneurs’ Relief has been retained. The lifetime allowance has been reduced from £10m to £1m, however the vast majority of small business owners will still benefit from this valuable measure.
This is of particular importance to those who are seeking to sell their businesses and qualify for the lower effective rate of capital gains tax.
Small Business Support
Business Rate Reliefs
The government has already announced the Business Rates retail discount will be increased to 50% in 2020-21. To support small businesses affected by COVID-19 the government is increasing it further to 100% for 2020-21. The relief will also be expanded to the leisure and hospitality sectors.
Pubs will also receive support in response to COVID-19 with their business rates relief increased to £5,000 for properties with a rateable value under £100k.
Small Business Grant Funding
The government recognises that many small businesses pay little or no business rates because of Small Business Rate Relief (SBRR). To support those businesses, the government will provide £2.2 billion of funding for Local authorities in England. This will provide £3,000 to around 700,000 businesses currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs. We look forward to receiving further details in due course.
Budget News for Employers
Statutory Sick Pay and COVID-19 (Coronavirus)
The government confirmed that it will temporarily extend SSP to cover:
- individuals who are unable to work because they have been advised to self-isolate
- people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate
As we know, SSP entitlement for these cases will commence from day 1, rather than day 4 as is usually the case. The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme are as follows:
- this refund will be limited to two weeks per employee;
- employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020;
- employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19;
- employers should maintain records of staff absences, but should not require employees to provide a GP fit note;
- the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force;
While existing systems are not designed to facilitate such employer refunds for SSP, the government will work with employers over the coming months to set up a repayment mechanism for employers as soon as possible.
National Insurance Savings
As expected, the National Insurance Contributions Primary Threshold at which NIC starts to be paid has increased to £9,500 from April 2020.
What’s more, the Employment Allowance which incentivises businesses to employ staff by providing Employer’s National Insurance savings, has been increased from £3,000 to £4,000.
There are also incentives for employers to take on veterans, with a National Insurance holiday for their first year of civilian employment.
National Minimum and Living Wage Rises
As expected, the National Minimum Wage and National Living Wage will rise as follows from April 2020.
- 25 and over £8.72
- 21 – 24 £8.20
- 18 – 20 £6.45
- Under 18 £4.55
- Apprentice £4.15
Therefore, be sure to review your current rates of pay to identify any employees who are affected. For the 25 year olds and overs this represents a 6.2% rise on the current level.
Neonatal Leave and Pay
The government will create an entitlement to Neonatal Leave and Pay for employees whose babies spend an extended period of time in neonatal care, providing up to 12 weeks paid leave so that parents do not have to choose between returning to work and taking care of their vulnerable newborn.
In addition, the government will consult on the design of a new in‑work entitlement for employees with unpaid caring responsibilities, such as for a family member of dependents
Sole Traders and Partners
The lower profits limit, the level at which Class 4 National Insurance starts to be paid on profits, has been increased to £9,500. This will produce a £78 saving for those affected.
The income tax rates and thresholds remain unchanged as expected.
Further Financial Support re COVID-19
Time to Pay Arrangements
The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.
Coronavirus Business Interruption Loan Scheme
The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
This is a summary of some of the key points that will commonly affect business owners. It isn’t intended to be a complete point by point account of the Budget, as that would be far too lengthy and the key points would be lost. We await the finer detail following the publication of the Finance Bill in due course.
As always, please seek tax advice for your particular circumstances. If you would like to speak to a member of the team to see how we can help please get in touch. We’d love to speak to you.