Budget 2020

I must admit to being rather excited about 2020 Budget and although the delivery may have been considered and professional, it doesn’t feel like the catalyst for change I was hoping for.

However, maybe I am being unfair. The Chancellor has been in his job for less than a month. Not only did he have to try and keep the Traditional Conservative’s happy after a strong victory in the recent General Elections, he also had to appeal to the traditionally Labour seats which recently ‘lent’ their votes to the Conservatives in order to boost their changes of retaining those seats in the future. In addition to that, is the outlook of low growth, Brexit and Coronavirus; no biggies.

Here is a brief summary of what came out of today’s Budget:

Economic Climate

• Economic growth sinks from previously predicted 1.4% to 1.1% this year, before the impact of Coronavirus.
• Borrowing projected to increase from £33.3bn to £60.2bn in 2023/24, with Treasury to review ‘Fiscal Rules’ limiting borrowing in July.
• Debt projected to remain high at 75.2% of GDP in 2024/25, before factoring in Coronavirus.

Coronavirus Update

• £30bn package to combat Coronavirus outbreak, including £5bn emergency fund to support NHS and other public services in England.
• Those advised to self-isolate will be entitled to statutory sick pay, as previously announced. However, it was added that this would apply even if they have not presented with symptoms.
• The self-employed will be able to claim contributory Employment Support Allowance, which they are normally not eligible for. This benefit will be available from day one, rather than after a week.
• Firms with less than 250 staff will be refunded for sick pay payments for two weeks and be able to access “business interruption” loans of up to £1.2m.
• More widely, £6bn of ‘new’ NHS funding for staff recruitment and hospital upgrades, including £100m in 2020/21 for Boris Johnson’s ‘new’ hospitals and increase in Immigration Health Surcharge to £624 a year for non-UK nationals to use NHS.

Individuals

• Headline winner was no national insurance contributions on the first £9,500 of earnings (currently £8,632), as expected. First announced in November, this will take 500,000 employees out of tax altogether, although it will only save everyone else around £85 a year.
• Inheritance threshold from April 2020 will hit £500,000, making the tax-free amount for married couples £1m, as previously announced.
• The allowance for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000 from April. However, the typical amount saved currently is only £1,000.
• As widely reported, the Tampon Tax will finally be abolished after years of campaigning. The Reduced Rate of 5% VAT will vanish from January 2021.
• Those on higher earnings, including doctors and nurses earning under £200,000 can now work overtime without it affecting their pension.
• New Neo-natal pay and entitlement of £160 per week for up to 12 weeks for parents of sick new-born babies.
• Up to 60 days breathing space for those with debt problems from 2021.
• End of the benefit freeze, with working age benefits to rise by 1.7% in April, although this is still below inflation.

Businesses

• The headline for us here was the abolition of business rates in England in the retail, leisure and hospitality sectors, with a rateable value below £51,000. Pubs will also get a bigger discount from £1,000 this year to £5,000. Small businesses can claim £3,000 cash grant, with further announcements on rates expected later this year.
• The big surprise today (well every Budget Day) was Entrepreneurs Relief will be retained, but the lifetime allowance will be reduced from £10m to £1m. The Chancellor believes this should not materially reduce the incentive to start and build businesses, with 80% of businesses unaffected.
• Those working from home, who claim £4 a week off their income tax bill, will be able to claim £6 from April.
• Minimum wages per hour will increase significantly from 1 April 2020 to:
  • Over-25s: £8.72 (currently: £8.21);
  • 21 to 24: £8.20 (currently: £7.70);
  • 18 to 20: £6.45 (currently: £6.15);
  • Under 18: £4.55 (currently: £4.35); and
  • Apprenticeships: £4.15 (currently: £3.90).
• The National Living Wage will reach two-thirds of median earnings by 2024 – forecasting a wage for over-25s of £10.50 an hour.
• Corporation tax cut to 17% was cancelled, as previously announced. It remains at 19%.
• £5bn to be spent on gigabit-capable broadband into the hardest-to-reach places, with additional spends promised on science and research.
• VAT on digital publications, including newspapers, e-books and academic journals to be scrapped by the end of the year.

For information and guidance related to R&D tax credits contact us today.

Environment

• Plastic packaging tax to be introduced from April 2022.
• £120m emergency relief for those affecting by flooding and £200m for flood resilience, with investment in flood defences to double to £5.2bn over next five years.
• ‘Nature for climate fund’ of £640m to protect natural habitat, including 30,000 hectares of new trees.
• Fuel duty is frozen for the 10th year in a row, but there is a significant £1.6bn-a-year cut to polluting red diesel tax relief (agriculture, fishing and rail sectors exempt).
• £800m for two carbon capture and storage clusters, creating 6,000 new jobs.

In other news

• £600bn to be spent on roads, rail, broadband and housing by the middle of 2025.
• £650m package to tackle homelessness, including an extra 6,000 places for rough sleepers.
• New £1bn fund to remove all unsafe combustible cladding from all public and private housing higher than 18 metres.
• Leaseholders will be able to access grants to safely remove unsafe cladding from flats.

Losers from today?

• Although as predicted, there is no change/delay to the IR35 changes.
• There is little offered thus far for the self-employed and workers.
• No improvement of R&D Tax Credits for SMEs, although there is an increase in the RDEC (large company relief) rate from 12% to 13%.
• No cut in stamp duty land tax. Indeed, stamp duty surcharge for foreign buyers of properties in England and Northern Ireland to be levied at 2% from April 2021.
• No cut in alcohol duties despite lobbyist’s best efforts. Wine, beer, cider and spirits duties all frozen this year, but Tobacco Duty and Hand Rolling Tobacco duty rise by RPI +2% and RPI +6% respectively from 6pm today.
• No help for WASPI women, unfortunately, but as expected.
• Five-week wait, and two-child limit remain on Universal Credit. Gulp.
• No new funding for social care in the Budget, aside from Coronavirus Support Fund.
• I am sure I have missed out some other further hopefuls. But perhaps most notably, is this enough action on the Environment?

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If you have any question on the above and how it will impact you or your business, please email us, complete the ‘Got a Question’ form on the right-hand side, or call us today on 0800 140 4644.