Yesterday, whilst much of the country was busy stockpiling pasta, toilet roll and hand sanitiser, the Chancellor Rishi Sunak delivered his first Budget in the House of Commons under the new parliament.
Sunak addressed the coronavirus outbreak in his opening speech and recognised the severe anxiety felt by many businesses about the possible impact of cashflow difficulties that may occur due to reduced trading and staff sickness.
This is our overview of the government’s tax and spending plans for the year ahead that may affect your business.
- £2bn of sick-pay rebates for up to 2 million small businesses with fewer than 250 employees.
- £1bn of lending via a government-backed loan scheme, with government backing 80% of losses on bank lending.
- Abolish business rates altogether for this year for retailers, in a tax cut worth more than £1bn.
- Any company eligible for small business rates relief will be allowed a £3,000 cash grant – a £2bn injection for 700,000 small businesses.
- The chancellor held back from abolishing entrepreneur’s relief despite describing it as “expensive” and “unfair” in its current form, with three-quarters of the relief going to just 5,000 individuals. Instead, he opted to reduce the lifetime limit on the relief from £10m to £1m – a measure which will save £6bn over the next five years.
Personal taxation, wages and pensions
- Pensions tax breaks for higher earners are to be made more generous from next month under measures announced by the chancellor aimed at easing workforce pressures on the NHS. Currently, the standard tax-free annual allowance on pension contributions is £40,000, however this starts to taper down to £10,000 for those earning more than £110,000. In his Budget, Mr Sunak announced that the income threshold at which tax relief on pension contributions starts to shrink will rise from £110,000 to £200,000. However, at the same time, the minimum floor which the annual allowance could apply to for higher earners will fall from £10,000 to £4,000.
- The chancellor confirmed that the National Insurance threshold will be raised from £8,632 to £9,500 from next month, giving 31 million people a tax cut. This will take effect in just over four weeks when the next tax year begins. The average worker will be better off by £100 a year.
- A clampdown by HMRC to tackle aggressive tax avoidance and evasion is anticipated to bring in £4.4bn.
- The annual capital gains tax allowance for individuals will rise from £12,000 to £12,300 in 2020-21. The exemption for trustees will be £6,150.
The scale of the spending and borrowing announced yesterday has certainly caused a stir. With so much up in the air and increased uncertainty, the budget fell at a particularly difficult time.
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