Spring Budget 2020: Top 5 takeouts for businesses

Adams Moore Accountants & Business Advisers

It’s that time of year again where company owners up and down the nation wait with baited breath to hear what the annual Budget has in store and how, most crucially, it will impact their business. As Rishi Sunak’s first Budget in a post-Brexit landscape – paired with the yet-unknown impact of Coronavirus on the economy – this year’s proposals are under more scrutiny than ever if the Chancellor wishes to ‘unleash the country’s potential’ as previously promised. Here, we explore the top five reforms concerning SMEs and how the Budget 2020 looks set to shape the future of UK businesses.

1. COVID-19: protective measures for small businesses

To ensure the impact of coronavirus on the UK economy remains temporary, the Chancellor has announced a number of measures to help stabilise both small businesses and the self-employed community:

• Statutory Sick Pay refund – for businesses of 250 employees or less, Statutory Sick Pay will be paid to any worker absent through self-isolation (as advised by a health professional), and refunded by the Government for up to a 14-day period – whether testing positive for the virus or not.
• Employment and Support Allowance – to support those with a disability, health condition, or self-employed individuals without access to sick pay, the contributory Employment and Support Allowance (ESA) can be claimed from day one – as opposed to day eight – meaning faster access to funds.
• Business rates abolished – from independent cinemas to local restaurants, the Chancellor has announced that business rates are to be abolished altogether this fiscal year in support of businesses with a rateable value of £51K or less. Those eligible for small business rate relief will also receive a £3K cash boost.
• Funding scheme for SMEs – with the Bank of England slashing interest rates by 0.5% in an emergency move, a term funding scheme will also be introduced for SMEs. This will encourage lenders to offer cheaper loans during the economic crisis, in turn supporting the cashflow of smaller businesses in need.

Key takeout – Businesses should encourage employees to self-isolate if symptoms should arise so as to protect the wider workforce, safe in the knowledge that both parties are protected by Statutory Sick Pay.

2. ‘Access to cash’ made simple

While we may live in a largely contactless society – with many SMEs adopting the latest innovations to go cashless altogether – not all businesses are following suit, with some remaining reliant on the handling of cash where day-to-day transactions are concerned. For smaller businesses operating in local communities, the Chancellor’s plans to protect and promote the usage of cash will help them stay afloat, enabling those customers wishing to pay with cash to continue doing so. Soon to commence talks with the Bank of England, the Payment Systems Regulator, and the Financial Conduct Authority (FCA), the Treasury’s plans to safeguard the nation’s access to cash include support for banks suffering branch and cash machine closures, as well as the creation of a new system to move money around the UK so as to make cash accessible for all.

Key takeout – Cash-reliant businesses looking to adopt alternative payment methods should review their long-term strategies, based on new legislation designed to make access to cash easier for all.

3. A ‘light-touch’ approach to IR35

As one of the more controversial policy shake-ups to take place this year, the IR35 tax reform will be actioned from 6^th of April – despite calls from the self-employed community for it to be reversed. Introduced to the public sector in 2019, IR35 will now extend to the private sector – meaning self-employed freelancers and contractors will be required to pay the same level of tax as a permanent member of staff. While Sunak chose to omit any mention of IR35 in his Budget speech, the legislation will involve a light-touch approach during its initial roll-out; customers incurring off-payroll penalties within the first year will be let off, for example. Designed to crack down on those contractors operating under a limited company for tax benefits, IR35 enforcement will be for the company in question to decide regarding who falls under its umbrella.

Key takeout – Self-employed workers affected by the IR35 reform will be granted more time to adjust to this financial change, and so are advised to plan accordingly for its potential impact.

4. The National Insurance tax cut

Standing by its manifesto to ensure hardworking people pocket more of what they earn (with the first £12,500 earned remaining tax-free), the Government will increase the National Insurance threshold to £9,500 this financial year. Affecting 31 million taxpayers nationwide, this will mean a saving of £104 for the average UK employee, while the self-employed worker will receive a tax cut to the chime of £78. As an increase of 10% where NICs payment is concerned – for both employed and self-employed workers – upper NICs thresholds will continue to freeze at £50,000, while other thresholds will rise with inflation. In addition, the National Living wage will be increased to over £10.50 an hour.

Key takeout – Payroll departments should prioritise updating their employees’ salary status, in line with the latest changes.

5. Entrepreneurs’ Relief under reform

Despite rumours it may be scrapped in Sunak’s maiden Budget, Entrepreneurs’ Relief will instead be scaled back to a lifetime allowance of £1m. While designed to incentivise the growth of new ventures in the UK, Sunak claimed that less than 1 in 10 claimants deemed it so – making it both unfair and ineffective. While 80% of SME owners won’t be affected by this change, the £6billion saved over the next 5 years will instead be allocated to additional business growth programmes. These include increased tax relief for companies involved with research and development (R&D), with R&D expenditure credit raised from 12% to 13%. Structures and Buildings Allowance will also increase from 2% to 3%, while Employment Allowance will rise to £4,000.

Key takeout – Company founders looking to sell their businesses this year should review the changes to Entrepreneurs’ Relief and how it may affect their future retirement funds.

Are you a fledgling business seeking tailored accountancy support? Adams Moore offers a fixed-fee ‘Business Start’ package designed to do exactly that – from developing your business plan to bookkeeping and training for staff. Or perhaps our fixed fee, unlimited accountant access Board Support service would suit your business where we act as an outsourced FD to drive your business forward with you.

Drop us a line to see how Adams Moore could help your business succeed in 2020.