Posted on: 11 March 2020

How Britain’s financial plans could affect your business

The UK Government has announced their first budget since Autumn 2018, following the uncertainty surrounding Brexit.

Following Sajid Javid’s resignation as Chancellor of the Exchequer, Rishi Sunak delivered his first budget on 11th March 2020; the first since the United Kingdom left the EU.

We have taken a look at some of the announcements in the budget that could affect your business.

How the budget will affect your business

Before the budget was announced, the Bank of England announced an emergency cut in interest rates from 0.75% to 0.25% to help boost the UK economy in the wake of the 2020 Coronavirus outbreak.

The Bank said it would also free up billions of pounds of extra lending power to help banks support businesses and would encourage consumer spending to keep the economy strong.

Coronavirus

During an interview with Andrew Marr, Rishi Sunak discussed how the NHS would receive “whatever resources it needs” to fight Coronavirus in the UK.

Coronavirus featured heavily in the 2020 budget, with the Chancellor addressing concerns of UK citizens. With as many as 1 in 5 workers potentially being affected by the virus, the Chancellor recognised that not only will workers not be able to go to work, but also people would be spending less as they self-isolate.

Mr Sunak announced his plan to ensure that the UK economy remained strong over the next year by announcing the following measures:

The NHS would be receiving extra funding to be able to carry on providing health care to people suffering from the virus.

Those who can’t go to work can claim sick pay from day 1 of their self-isolation and can receive a sick note over the phone from NHS 111. Self-employed workers are also able to claim a sickness benefit from day 1, with rules about attending a jobcentre being relaxed so that benefits can be claimed without leaving self-isolation. Additional funding of £500m is being distributed to local councils as a hardship fund.

The Chancellor announced that businesses with fewer than 250 employees will be able to claim back the full amount of sick pay costs from the government for the two weeks of self-isolation, with £2bn set aside for the 200 million businesses expected to require this support.

To help businesses to keep running, tax payments can now be deferred for an extended period to ensure that cash flow remains strong.

Businesses can also claim a low-interest business interruption loan to help them continue to trade until the virus is under control. Loans can be provided up to £1.2m.

For the next year, business rates are being abolished for businesses with a rateable value of below £51,000. The Chancellor recognised that there are businesses in the hospitality sector that will exceed this value but will still experience a significant hit to their income because of the virus, so he announced today that businesses in the hospitality sector would also receive a 100% retail discount.

Small and Medium-Sized Enterprises (SMEs) will be able to receive a cash grant of £3,000 to help them during the Coronavirus outbreak.

In summary, Mr Sunak announced £7bn in support for businesses, £5bn for the NHS, £18bn to support the economy for the upcoming year; in total a £30bn investment. He also announced a £150m contribution to the IMF to assist the global fight against Coronavirus.

Infrastructure

The Chancellor of the Exchequer announced that there will be £600bn going into infrastructure for the UK. This includes setting up a treasury office in the North of England, Scotland, Wales and Northern Ireland to create 22,000 civil servant roles outside of London.

The budget also provided £640m for Scotland, £360m for Wales and £210m for Northern Ireland to be used in infrastructure projects. There was also a £222m fund set up for cities to use to grow. £1bn was also announced to allow cities such as Stoke-on-Trent, Preston, Derby, Nottingham and Southampton grow and receive access links.

£5bn is to be used to bring gigabyte broadband coverage to rural areas, with £510m of this to be used to bring 4G coverage to at least 95% of the country.

£27bn was pledged to UK roads, which has the potential to build 20 connecting sections of motorway, 100 junctions and 4,000 miles of road. This also included a £2.5m pothole fund.

Fuel Duty Freeze

The Chancellor was expected to bring an end to the Fuel Duty freeze, which would increase fuel prices for the first time in 10 years.

However, Mr Sunak announced that the Fuel Duty Freeze would remain in place to allow consumers and businesses to continue to enjoy cheaper fuel prices.

Corporation Tax

Rishi Sunak announced during the budget that corporation tax would remain at 19%.

National Living Wage

By 2024, the National Living Wage is predicted to go over £10.50 an hour based on current projections of the UK economy and if economic conditions allow.

Environmental

Rishi Sunak announced various taxes on pollution to ensure that the UK will be a world leader in leading the green revolution.

Starting in April 2022, tax on electricity will be frozen, whilst being raised on gas as electricity is a cleaner form of energy.

Also starting from April 2020, businesses will be charged £200 per tonne of imported plastic that is less than 30% recycled in an attempt to encourage more businesses to use less plastic packaging. This will be known as the Plastic Packaging Tax.

The climate change agreement scheme has also been extended for another two years.

Many businesses can use red diesel as a fuel, which benefits from tax relief that works out at 11p per litre as opposed to the 58p per litre equivalent when using regular fuel. This tax relief will come to an end to support the phasing out of diesel as a fuel in 2022 to allow businesses to prepare for the additional cost. It was announced that agriculture, rail, domestic heating and fishing industries will continue to receive the tax relief from using red diesel until a later date.

Entrepreneurs’ relief

Entrepreneur’s Relief was one of the tax cuts that was expected to be abolished in the 2020 budget, however, the Chancellor announced that there would be changes instead of an abolishment.

It was estimated by the Chancellor that Entrepreneur’s Relief costs £2bn per year so the £10m relief was to be reduced to £1m for the lifetime claim limit, which would save around £6bn over the next 5 years. It was also estimated that 80% of businesses would not be affected by this change.

Mr Sunak also promised that the money saved would be used to cut other business taxes and an additional £130m of funding to help up to 10,000 start-up entrepreneurs.

There would also be an increased employment allowance by a third, which translates to a £500,000 cut for small businesses.

Other financial investments into UK business included a £200m fund for British businesses and £200m set aside for investments into life sciences.

Alcohol-related funding

As the whiskey industry is one of the essential industries in Scotland, the government announced a £1m investment to help businesses over the upcoming years, but also a £10m investment to help all breweries in the UK adopt greener practises. The government also announced that they would be working with the US government to help lower the import tax that they pay on Scottish whiskey, allowing the industry to continue to be profitable when exporting to the US.

The Chancellor has previously announced that there would be a spirit duty tax and a rise on beer duty, however during the budget, he announced that neither of these would be introduced, and there would be a freeze on cider and wine duties, helping the hospitality industry.

Pubs were also recognised as community hubs and would be receiving a business rate discount of £5,000 to help them in the upcoming year. This is an increase from the £1,000 that pubs currently receive.

Investing in ideas

As a country that brought many scientific discoveries to the world, the Chancellor announced investments in the Research and Development (R&D) field to allow the UK to become world leaders once again.

This came in the form of a £22bn investment into R&D, including £1.4bn for the Science Institute in Weymouth who are researching a cure for coronavirus, £900m for nuclear energy, space and electric vehicles and £800m into blue skies funding agencies.

Mr Sunak also commented that 50% of R&D budgets currently go into London, so to ensure that the whole country can carry out research, £400m would be spread to universities around the country.

Other key points from the UK budget 2020

National Insurance Contributions

Before the budget, the national insurance contribution limit was set at £8,632. However, during the budget, the Chancellor announced that he was raising the limit to £9,500 to allow workers to have more money in their pocket.

Abolition on tampon tax

Feminine hygiene products would be no longer seen as a luxury item, ending the 5% tax on these products.

VAT abolished for digital products of books and magazines

Digital versions of books, journals and magazines would become VAT free from December 2020.

Funding for HMRC

Mr Sunak announced that there would be additional funding provided for HMRC to allow the government to collect a further £4.4bn of tax income to help pay for public services.

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