Amidst all the concern surrounding the coronavirus, the government issued their budget on 11th March 2020. It was a budget for business with several measures being relevant to small business owners and the self-employed.
Chancellor Rishi Sunak announced a £7bn support package for small businesses including tax cuts, loans and grants for small businesses. He also included a coronavirus business interruption loan scheme offering loans of up to £2m to small businesses, unlocking up to £1bn of capital for SMEs.
We have summarised the main points here relevant to SME’s.
Statutory sick pay for SMEs
The Government will cover statutory sick pay to all those advised to self-isolate from the virus. They will refund the cost of statutory sick pay for up to 14 days to small- and medium-sized businesses at a cost potentially of up to £2bn. This will apply to businesses with up to 250 employees. Statutory sick pay will be offered from day one (as opposed from day four) for all those advised to self-isolate even if they haven’t shown symptoms. The government will also make it quicker to access benefits for the self-employed, enabling them to claim from day one instead of day eight, and temporarily removing the minimum income floor from Universal tax credit.
National Insurance Changes
National insurance threshold to be raised to £9,500 from £8,632, providing a tax cut for 31m people. The National Living Wage is set to reach £10.50 an hour by 2024.
Currently, the Employment Allowance gives small employers £3,000 off their National Insurance payment. This will be increased to £4,000, meaning that small businesses can benefit as they will be able to employ four full-time employees without paying any employer National Insurance contributions which is good news for small businesses who want to employ staff.
Coronavirus Business Interruption Loan Scheme
This scheme will support up to a further £1bn lending to smaller businesses. The government will guarantee bank loans to small businesses on amounts of up to £1.2m. The government will cover bank losses of up to 80%.
Business rates changes
Business rates will be abolished altogether for smaller firms in retail, leisure and hospitality – this is a tax cut worth up to £1bn. The scrappage will only apply to premises with a rateable value of up to £51,000 to help with losses potentially suffered from decreased demand until the end of 2020. Our view is that this will really help small high street businesses who are going to see a downturn in business during the coronavirus period.
Small businesses cash grant
Small businesses that pay no business rates will receive a £3,000 cash grant, worth a total of £3bn. It is unclear at this stage how businesses can access the cash. We will advise further on this.
Entrepreneurs’ Relief to be scaled back
Despite rumours that this would be abolished, the Chancellor opted for reform instead.
This means that enterprising small business owners will continue to benefit from this scheme. This scheme enables businesses owners to pay reduced capital gains tax of 10% instead of 20% up to a lifetime allowance of £10m. The limit will now be £1m of gains.
£130m of new funding to extend start-up loans
The start-up loan scheme will be extended. This will aim to support up to 10,000 more startups between 2021 and 2022. There was also news that £5 billion of new export loans would be available for businesses to enable them to build business overseas. In addition, £200m in new funding for British Business Bank to invest in scale-ups.
Businesses given HMRC tax payment extension
To help further with cash flow the Government’s ‘Time to Pay’ service is also being scaled up, allowing businesses and the self-employed to defer tax payments. HMRC will accept deferred corporation tax payments over pre-agreed periods of time.
Other changes worth noting
- VAT for digital publications from 1st December 2020 will be scrapped and this will include books and newspapers.
- R&D tax credit to be increased from 12 per cent to 15 per cent
- Employment allowance to be increased by one third – we already mentioned this?
- IR35 planned changes are going ahead.
Our thoughts on the budget
Some good news for small businesses in terms of business rate relief. Not such good news regarding the reversal of the proposed cut in corporate tax to 17%. The change to entrepreneurs was not a surprise as we were expecting this. Our overall view is that this is a positive budget in very uncertain times.
The full budget summary can be found here
If you need any help or advice on how this relates to your business, please contact us.