Budget 2020: Live updates on how it will affect your small business

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Hello and welcome to Startups.co.uk’s live coverage of Budget 2020. We’ll be offering regular updates as announcements are made by the new Chancellor Rishi Sunak, with analysis and insight from leading figures on how UK small businesses are likely to be affected.

<>What to expect from Budget 2020>

Coronavirus response

Unsurprisingly, much of the budget is expected to be dominated by the response to the coronavirus crisis that’s currently gripping the UK.

Already, the Bank of England has announced it will cut the UK interest rate from 0.75% to 0.25%, a move which should then reduce the overall cost of borrowing in the UK.

An increase in NHS funding is pretty much guaranteed but what’s likely to be of more interest to small businesses is how the government responds to the virus’s impact on companies across the UK.

Already, demand is falling and sick pay costs are spiralling as UK consumers stay indoors and employees self-isolate.

To address these issues, The Federation of Small Businesses (FSB) has called for the following measures:

• An immediate statutory sick pay rebate (essentially a sick pay refund from the government) to help small businesses struggling with the cost of self-isolating employees
• Interest-free loans for firms with cash flow problems
• A temporary cut in VAT if the crisis continues to reduce consumer demand

Tax changes

Away from coronavirus, the FSB argue for:

• Increasing the Employment Allowance from £3,000 to £4,000 to enable more small businesses to be exempt from national insurance contributions
• A fundamental review of the business rates system
• Reforming entrepreneurs’ relief, instead of scrapping it entirely

The increase in the employment allowance seems likely – this was included in the Conservative 2019 election manifesto. It would only apply to employers that have a total national insurance bill of less than £100,000, but this is likely to include the majority of small businesses.

In terms of business rates, while there is wide acceptance that the current system has issues, it’s hard to imagine this being prioritised in today’s budget, which is expected to focus on addressing the coronavirus and introducing measures to, in the words of Prime Minister Boris Johnson, “level up” the UK.

Finally, it seems likely that entrepreneurs’ relief will be scrapped altogether – especially given the IFS’ rather scathing conclusion that the tax break (which allows business owners to pay a reduced 10% capital gains tax) does not boost investment in the UK economy.

Another manifesto commitment that is likely to be confirmed is the primary national insurance threshold increasing from £8,362 in 2019/20 to £9,500 in 2020/21. This would reduce the amount of national insurance paid by employees and therefore benefit businesses across the UK.

Corporation tax is expected to stay at 19%, and no increases are expected to income tax, national insurance, or VAT.

Infrastructure commitments

On a grander scale, the headline announcement is expected to be huge investment in roads, railways, scientific research, and broadband, which is expected to exceed £600bn over the next five years.

However, while this may lead to new business opportunities for small businesses operating in specific areas, The Guardian points out that much of this money has already been pledged and so the increase may not be as ‘historic’ as the government claims.

Notably, the infrastructure strategy document that explains how this money will actually be spent is not expected to be published for several weeks, and so the only firm commitment in this area seems to be the one made in the manifesto, a pledge to spend £2.5bn over the next five years fixing potholes.

The long-proposed HS2 rail line is still expected to go ahead, but it remains to be seen what form this will take, with the HS2 minister Andrew Stephenson recently suggesting that the line to Manchester may be built before the line to Leeds.

<>Live updates>

Budget 2020: Boris Johnson hints that sick pay may be extended to self-employed

The first Budget 2020 hint comes before Rishi Sunak has even unveiled his red briefcase.

Responding to a question from Jeremy Corbyn in PMQs, Boris Johnson states that people “on all types of contracts” will be protected and that no one who stays at home will be penalised.

This is a clear signal that the government is considering the self-employed in its coronavirus response planning, and may extend sick pay to this group, something various groups have called for in recent weeks.

Budget 2020: Small businesses to be given SSP refund

As expected, Rishi Sunak announces that small businesses will be given an SSP refund for any employees that have to self-isolate due to the coronavirus.

This will apply to all businesses with less than 250 employees and be paid for a maximum of 14 days.

Other SSP measures include SSP being paid from day 1 instead of day 4, and employees being able to self-certify through the 111 NHS number.

However, while there were some measures to support the self-employed (including easier access to benefits like the employment support allowance), there was no mention of extending SSP to the self-employed.

Budget 2020: HMRC Time to Pay service to be scaled up

To help businesses struggling with the impact of coronavirus, the HMRC Time to Pay service will be scaled up, allowing more businesses to defer tax payments over an agreed period of time.

Budget 2020: Coronavirus Business Interruption Loan scheme announced

Another measure to support businesses struggling with coronavirus, Sunak announces that the government will support banks to offer ‘generous loans’ that cover up to 80% of losses with no fees.

Budget 2020: Business rates to be abolished for small leisure and hospitality businesses for 12 months

In a measure likely to make a significant difference to small businesses across the UK, Sunak announces that businesses rates will be abolished for 12 months for all businesses with a ratable value below £51,000 operating in the leisure and hospitality sector.

Sunak also announces that a full business rates review has been delayed to the Autumn budget.

Budget 2020: £3,000 cash grants to be made available to small businesses

Not much detail given for this one, but Sunak announces that cash grants of up to £3,000 will be available to the UK’s smallest businesses to help them with the impact of coronavirus.

Budget 2020: Living wage to be increased to £10.50 per hour by 2024

A measure likely to increase costs for small businesses, Sunak confirms that the National Living Wage (the new name for the national minimum wage) will increase to 2/3 of median earnings by 2024.

At current rates, that would mean a 2024 National Living Wage of £10.50 per hour.

Budget 2020: Entrepreneurs’ relief to be reformed, not abolished

Sunak notes criticism of Entrepreneurs’ Relief and notes that, following the recommendations of the Federation of Small Businesses, the lifetime limit will be reduced from £10m to £1m.

This seems like a sensible middle ground, raising funds for the government while still encouraging business investment.

Budget 2020: Employment allowance to increase to £4,000

In another measure suggested by the Federation for Small Businesses, Sunak announces that the Employment Allowance will increase by a third to £4,000 from April which, he argues, will mean a tax cut for nearly half a million small businesses.

Budget 2020: Alcohol duty and fuel duty to be frozen

In a measure likely to benefit both consumers and small businesses, Sunak announces that both alcohol duty and fuel duty will be frozen in the next tax year.

Of the two, the freeze in fuel duty is likely to have the bigger impact on small businesses.

Budget 2020: Gas tax to increase from April 2022

In order to encourage use of electricity over gas and therefore reduce pollution, Sunak announces that the tax on gas will be increased from 2022.

No details given, but small businesses will need to be prepared for this transition.

Budget 2020: Plastic packaging tax to be introduced

Another environmental measure, Sunak announces the introduction of a new tax on plastic packaging.

Packaging that includes less than 30% recycled plastic will be taxed, costing manufacturers and importers £200 per ton.

Affected businesses should look into ways to increase their use of recycled plastic, or other packaging options.

Budget 2020: £500m to support electric vehicle charging

Sunak announces that the government will invest £500m to support the rollout of rapid charging hubs for electric vehicles.

The intention is for drivers to never be more than 30 miles from being able to charge their car.

This signals that the government is serious about supporting electric vehicles, and small business need to start thinking about transitioning away from conventional vehicles.

Budget 2020: £5bn to be invested in rural broadband

In order to support the expansion of broadband into rural areas, Sunak announces that the government will invest £5bn into what he calls gigabit-capable broadband.

If implemented properly, this should be a real boon to small businesses that operate in the more isolated parts of the UK.

Budget 2020: National insurance relief announced for small businesses that employ veterans

In order to help service leavers return to work, Sunak announces that small businesses who employ veterans will be given a one-year national insurance holiday.

Budget 2020: £12.2bn to be invested in affordable homes

Sunak announces that the government will invest £12.2bn to extend the Affordable Homes Programme.

It’s announced as a multi-year agreement, so likely over the five years of the parliament.

This should lead to new opportunities for small businesses operating in the construction sector.