Just four weeks into his new role of Chancellor of the Exchequer, Rishi Sunak delivered the budget on the 11 March 2020. As expected, the first topic the Chancellor addressed was the coronavirus outbreak, so many are worried about. After announcing fiscal stimulus, sick pay, the NHS and assistance for small businesses – the Chancellor then moved on to other key issues including welfare, borrowing and the environment.
We’ve highlighted the main points from the budget below:
The public finances
- Ignoring any short-term impact that might result from the coronavirus, the net total policy decisions added about £175bn of extra spending over the next five years, or an average of £35bn a year.
- The gross spending increase was over £200bn, reduced by tax receipts of about £27bn.
- Of the increased spending, the split between current and capital spending is about 60:40, so well over half of this new spending is extra spending on the here and now – we appear to have moved on from austerity to splashing the cash or, probably more accurately, the UK’s credit card!
- Of the extra tax receipts, most of this is stated to come from a limited number of sources: the reduction in the UK’s contribution to the EU Budget, the reversal of the decision to reduce the corporation tax rate from 19% to 17% from 1 April 2020, reducing the entrepreneurs’ relief limit to £1m, removing relief for red diesel and further investment into HMRC to improve compliance.
Coronavirus and public services
- £5bn emergency response fund to support the NHS and other public services in England.
- All those advised to self-isolate will be entitled to statutory sick pay, even if they have not presented with symptoms.
- Self-employed workers who are not eligible will be able to claim contributory Employment Support Allowance.
- The ESA benefit will be available from day one, not after a week as now.
- £500m hardship fund for councils in England to help the most vulnerable in their areas.
- Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks.
- Small firms will be able to access "business interruption" loans of up to £1.2m.
- £6bn in extra NHS funding over five years to pay for staff recruitment and start of hospital upgrades.
Environment and energy
- Plastic packaging tax to come into force from April 2022; manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne.
- Subsidies for fuel used in off-road vehicles - known as red diesel - will be scrapped "for most sectors" in two years.
- Red diesel subsidies will remain for farmers and rail operators.
- £120m in emergency relief for English communities affected by this winter's flooding and £200m for flood resilience.
- Total investment in flood defences in England to be doubled to £5.2bn over the next five years.
- £640m "nature for climate fund" to protect natural habitats in England, including 30,000 hectares of new trees.
- The off-payroll working (IR35) changes are still going ahead, being introduced next month in the private sector.
- Confirmed decision to keep the corporation tax rate at 19% rather than reduce to 17%.
- Entrepreneurs’ relief will be retained, but the limit is being cut back from £10m to £1m for disposals on or after Budget Day.
- There will be an increase in the Employment Allowance from £3,000 to £4,000 from April 2020.
- A further extension of temporary reliefs for business rates for properties with a rateable value below £51,000: the discount for the upcoming year will be increased from 33% to 50% and for 2021 will be increased to 100%. In addition, there will be a fundamental review of business rates which will report in the autumn and a call for evidence will be published in the spring (i.e. shortly!).
- Firms eligible for small business rates relief will get £3,000 cash grant.
- A new 2% tax will be introduced on the revenues certain digital businesses earn from 1 April 2020. Legislation will require businesses to pay the DST on an annual basis. The government will repeal the DST once an appropriate global agreement on digitisation is reached.
- Structures & Building allowance (SBA) - the rate of relief for SBA will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
- Capital Allowances for Business Cars - from April 2021 the first year allowance on zero-emission vehicles will be extended, and writing down allowance (WDA) of 18% will apply to cars with emissions up to 50g/km.
Research & Development
- RDEC rate - the rate of the Research & Development Expenditure Credit, will increase from 12% to 13% with effect from 1 April 2020.
- Preventing abuse of the R&D relief for small and medium-sized enterprises - following consultation last year, the introduction of the PAYE cap on the payable tax credit in the SME R&D schemes will be delayed until 1 April 2021. Further consultation will be made on changes to the cap’s design, to ensure it targets abusive behaviour as intended while ensuring that eligible businesses are able to access the relief.
- R&D tax credit costs - a consultation will be published on whether qualifying R&D tax credit costs should include investments in data and cloud computing.
- Current zero-rating of books and printed matter will be extended to their e-equivalents. This change will apply from 1 December 2020, a slightly surprising date although this rate has been permissible under EU law since late 2018.
- 5% VAT on women's sanitary products, known as the tampon tax, to be scrapped.
- The current NIC threshold will be increased from £8,632 to £9,500 from 6 April 2020.
- The pensions annual allowance thresholds will be increased by £90,000 each. Thus the threshold income will now be £200,000 rather than £110,000 and the adjusted income from £150,000 to £240,000.
Making Tax Digital
- The Government to publish an evaluation of the introduction of MTD for VAT before it decides whether to extend it to other taxes!
- Stamp duty surcharge for foreign buyers of properties in England and Northern Ireland to be levied at 2% from April 2021.
If you have any questions about how the budget will affect your personal or business taxes, don’t hesitate to contact us.