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Budget 2020: What do SMEs need to know?

With less than a month on the job, Chancellor of the Exchequer, Rishi Sunak, delivered his first budget on Wednesday 11th March 2020. Sunak began his budget statement by talking about the impact of COVID-19., stating he intended to "keep our country healthy and financially secure". In summary, a £30bn fiscal stimulus has been set aside to support “British people, British jobs and British businesses” through this ‘temporary’ impact on the UK economy.

Businesses are the lifeblood of the UK economy, having created 3 million new jobs since 2010, which has given people the chance to succeed and grow in the field of their choice, helping to boost the economy. The UK is one of the best places in the world to run a business and the most attractive country for inward investment in Europe. The government wants to ensure that the UK continues to be attractive for investment and remains a dynamic environment to start and grow a business. We have summarised the key points that will affect small businesses and their employees across Britain.

Covid-19 support:

  • Legislation to allow SMEs and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.
  • Increase the Business Rates retail discount to 100% for one year and expand it to the leisure and hospitality sectors.
  • All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
  • A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch to support businesses to access bank lending and overdrafts of up to £1.2 million.

Innovation:

  • Investment in research and development will be increased to £22bn a year by 2024-25.  This landmark investment is the largest and fastest ever expansion in support of researchers and innovative businesses, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China.
  • £5bn will be allocated to providing broadband in hard-to-reach areas of the country.
  • £510m will be invested in mobile 4G coverage.
  • The British Business Bank will be provided with additional resources to launch a dedicated £200m investment programme, which is expected to enable £600m of investment to ensure the UK remains a world leader in life sciences innovation.
  • £400m will be invested for universities across the UK to fund high quality research.

Backing businesses:  

  • £130m of funding is allocated to extending start-up loans to support entrepreneurs.
  • There will be £5bn worth of new export loans for businesses following the country’s exit from the European Union.
  • Employment Allowance is increased to £4k, a tax cut for small businesses.
  • Entrepreneurs relief lifetime limit is cut from £10m to £1m.
  • To ensure that all businesses have access to high quality support and advice in their region, the government will invest £10 million to increase Growth Hub capacity and provide high-quality, core business advice and guidance across all 38 Growth Hubs.
  • Firms eligible for small business rates relief will receive a £3,000 cash grant.
  • VAT is removed on all digital publications.
  • The corporation tax rate of 19% will be maintained.
  • The annual rate of the structures and buildings allowance will be increased to 3%.

General:

  • UK living wage targeted to hit over £10.50 an hour and be extended to workers aged 21 and over by 2024, providing economic conditions allow.
  • Day-to-day spending will be £100bn higher than it currently is in cash terms.
  • Public spending will grow 2.8% a year, twice as fast as the economy.
  • The National Insurance threshold will be raised from £8,632 to £9,500, a tax cut for 31 million employees.

Economic forecast:

  • GDP growth for 2019 has been cut to 1.1%, down from the 1.4% forecast in the 2019 Spring Statement. Forecasts for the next four years have been increased to 1.8% for 2021, before dropping again to 1.5% in 2022, and the following years estimate 1.3% in 2023 and 1.4% in 2024.
  • Debt is forecast to fall over the course of this parliament, going down from 79.5% of GDP this year to 75.2% in 2024-25.

  Green measures:

  • The levy on gas will rise yet be frozen on electricity.
  • A Plastic Packaging Tax will be introduced to combat plastic waste.
  • £500m will be allocated to the rollout of electric vehicle charging hubs.
  • Investment in flood defences will be doubled over the next six years following UK storms this winter.
  • 30,000 hectares of trees will be planted over the next five years.

 “This is a Budget delivered in challenging times. We will rise to this moment. We will get through this together. This Budget delivers security today. But it also lays the foundations for prosperity tomorrow. This is just the start.” – Rishi Sunak, Chancellor of the Exchequer.

Read the full budget 2020 round up here.