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.
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.
via https://www.AiUpNow.com/ by Alec Hawley, Khareem Sudlow
