On Wednesday 11 March, after having only taken up the post less than one month prior, Rishi Sunak delivered his first Budget speech.
He described it as a Budget that not only made promises for the ‘security of today’ but that ‘delivers on change’ and ‘lays foundations for prosperity tomorrow’; one that would be driven by a ‘government that gets things done’.
With the outbreak of Coronavirus currently impacting upon the UK, we are all faced with yet more uncertainty. The Chancellor addressed COVID-19 first in his speech and, in particular, how the government would respond to the challenge and support families, businesses and public services in the weeks and months to come.
Temporary measures in response to Coronavirus
To start proceedings, Mr. Sunak announced a number of ‘temporary, timely and targeted’ measures to help the UK cope with the outbreak of Coronavirus. These included:
- Individuals who are required to take leave from work, as a result of the virus, will be eligible for Statutory Sick Pay (SSP) from day 1.
- Recognising the cost to businesses of adhering to this, the Chancellor went on to confirm that the government would refund the cost of providing SSP to employees, for up to 14 days, to those with fewer than 250 employees.
- A temporary ‘Business Interruption Loan Scheme’ which will give banks the ability to offer small and medium-sized businesses loans of up to £1.2m (this has since been increased to £5m).
- Business rates for retailers with a rateable value below £51,000 will be abolished for 2020/21 (this policy will be extended temporarily to include leisure and hospitality businesses that were previously excluded).
Since the Budget, the Government have announced additional measures and issued further guidance on how businesses can access the support available. You can read more here.
The Chancellor’s first Budget
Having addressed the government’s response to COVID-19, the Chancellor moved on to outlining investment plans and policy changes that would affect businesses and individuals going forward.
The ‘cost of living’
The Chancellor announced that fuel duty would remain frozen and that all alcohol duties would also be frozen for 2020/1.
National Living Wage (NLW) & National Insurance Contributions (NICs)
The government reaffirmed its commitment to ensuring that the NLW is two thirds of median earnings, which would require a rate of £10.50/hr, and that it is extended to those aged 21 or over by 2024. This is in addition to the planned NLW increase in April 2020, which will see it increase to £8.72/hr.
The primary Class 1 NI threshold for employees and the self-employed will increase to £9,500, from £8,632. For most workers, this will mean a £104 saving and a saving of £78 for most self-employed individuals.
For employers though, the news is not so good since the secondary threshold will only increase slightly – from £8,632 to £8,788. We discuss the implications of this more in our recent blog.
Entrepreneurs’ Relief cut drastically
Changes to Entrepreneurs’ Relief (ER) had been trailed. It was not abolished, as had been suggested, however the lifetime limit on gains was reduced from £10m to £1m. This reduction applies from Budget Day (11 March 2020).
In a surprising move, the Chancellor announced anti-forestalling legislation which will make much of the pre-budget planning ineffective. This is a clear example of retrospective taxation.
‘An attractive place to do business’
In a bid to try and ensure that the UK is still an ‘attractive’ place to do business, the Chancellor announced that Structure and Buildings Allowance (SBA) would be increased to 3% – which is largely irrelevant -, that Research and Development Expenditure Credit (RDEC) would increase from 12%, to 13% – affecting only large companies -, and that Corporation Tax would remain at 19% – cancelling the expected increase.
The National Insurance Contribution Employment Allowance will increase to £4,000 but from the 6 April 2020, only applies to businesses with employer contributions in the previous year of under £100,000.
Other key Budget announcements
- Removal of the entitlement to use red diesel, except for agricultural businesses, and those in the business of fishing, rail or domestic heating.
- Non-UK residents will be required to pay a 2% Stamp Duty Land Tax (SDLT) surcharge when purchasing UK residential property, from April 2021.
- A plastic packaging tax will be introduced from April 2022.
- £2.8bn has been provided for Direct Payments to farmers in 2020. Read more about this here.
With the Budget done, we can now expect a Comprehensive Spending Review to take place and conclude later in Summer, which will set out the available budget for the next 3 years. HM Treasury will also review the current fiscal framework, to assess its suitability in the current climate, ahead of the Autumn Budget.