“Security today” and “prosperity tomorrow” – that’s how Chancellor Rishi Sunak announced the government’s Budget 2020.
As financial followers will know, it was the first budget since Brexit, the first for the North-East MP who took over the reins at the Exchequer just a few short weeks ago and also the first budget since the autumn of 2018 – due to Brexit and the General Election.
Crucially, it came at a time when the country is in the grip of emergency planning to halt the spread of COVID-19, an infection which has caused major disruption to worldwide economies and suspended usual working practices.
The chancellor said the economy was sound and public finances robust, but also that forecasts predicted COVID-19 would disrupt the economy and could affect one in five of the workforce.
In an unprecedented move, the Bank of England slashed interest rates to 0.25% on the very morning of the chancellor’s announcement.
So, how to make sense of it all and just how will Rishi Sunak’s budget impact your business?
Stockton-based chartered accountancy firm Baines Jewitt provided their clients with a Year End Tax Planning Guide and prior to the budget, advised clients of any anticipated changes that may impact on their immediate plans.
Within hours of the chancellor’s statement, they had prepared and published their own report on the major issues covered by the announcement and made it available in print and online.
On the whole, directors Trevor Cook and Anne Cowley’s initial reaction is that there were lots of positives and a step in the right direction for SMEs and the north.
A £30bn stimulus package to support the economy through COVID-19 contagion took centre stage – and rightly so, they say.
Noteworthy points from a business point of view include the support given on Statutory Sick Pay, allowing it to be paid from the first day of sickness absence for all those employees told to self-isolate, and this will be reimbursed by the government. For the self-employed and those in the gig economy, there will be quicker and easier access to benefits.
SMEs, particularly those in the retail, hospitality and leisure industry were also given a helping hand with business rates relief for properties with a rateable value below £51,000. A cash grant of £3,000 will be provided to each business eligible for the small business rates relief, worth £2bn in total to the UK’s 700,000 smallest businesses. Employment Allowance was also increased by £1,000 to £4,000, again a measure that helps smaller businesses.
Tax relief on Research and Development expenditure was increased, another positive point – and measures were also taken to improve the country’s infrastructure by providing funding for charging points for electric cars, broadband, railways and roads.
“Offering a tax benefit for electric vehicles is a positive step but you’ve also got to have the infrastructure there to make the change work,” says Anne.
Fuel duty was also frozen – something Trevor believes is a positive move, especially for anyone in the haulage industry, where a small percentage change to one of their main operating costs can have a big effect on profitability.
Higher earners received a tax boost on their pension contributions as a result of a change aimed at easing the workforce pressures on the NHS.
At present, the annual allowance on pension contributions of £40,000 reduces for those earning more than £110,000. From April, the earnings limit increases by £90,000 to £200,000.
The reduction in entrepreneurs’ relief from £10m to £1m may not be welcomed by all. The government said the change was intended to encourage genuine risk-takers and entrepreneurs in a fair way, leaving over 80 per cent of those using the relief unaffected.
The savings achieved will be invested straight back into innovative business and technology.
“If the rumours about the chancellor wanting to remove some of the UK treasury jobs to the north are true, that has to be welcomed by everyone in this area. Moving the jobs to Teesside would certainly support regeneration in this area,” says Trevor.
The government’s new catchphrase is, “This government gets things done.”
However, as always, the devil is in the detail. What will really change and when it will take effect?
It’s a mantra Trevor and Anne both echo when it comes to their work at Baines Jewitt.
“We can help to ensure financial plans remain effective, even as personal and business circumstances change,” Trevor adds.
- Pictutured above: chartered accountants Baines Jewitt are led by (left to right) Jed Lester, Don Adams, Trevor Cook, Mike Bigley and Anne Cowley.
• A reduction in Entrepreneurs’ Relief lifetime limit From £10m to £1m.
• An increase in Employment Allowance. This provides business and charities with rate relief from National Insurance Contributions costs. It will increase from £3,000 to £4,000 from April 6.
• An increase in the rate of Structures and Building Allowance Capital allowances for investments to build new or renovate old non-residential structures will increase from 2 per cent to 3 per cent.
• An increase and extension of business rate discounts Aimed at the retail, leisure and hospitality sectors who might be hit hardest by the spread of coronavirus, this measure suspends business rates for a year for qualifying businesses with a rateable value below £51,000.
• Extended access to Statutory Sick Pay Sick pay will be paid from the first day of sickness absence rather than the fourth for people who have Covid-19 or who have to self-isolate in accordance with government guidelines.
• An increase in National Insurance thresholds.
• A freeze on fuel duty for the tenth consecutive year.
Emergency measures tackle pandemic fallout
At the time of publication, additional emergency measures were being put in place by the chancellor to help businesses and individuals cope with the rapidly changing financial implications of the Covid-19 pandemic.
They included £330bn in loans, £20bn in other aid, a business rates holiday and grants for retail and hospitality businesses over the coming months. Help for airlines is also being considered.
“There is no doubt this is and will continue to be an unprecedented era for businesses and individuals across the Tees Valley,” said Anne.
“We are working hard to ensure we stay as well prepared as possible and thanks to the technology we employ within our practice at Baines Jewitt, our clients can enjoy a continuity of service from us.
“The chancellor has pledged to take further economic measures if the post-budget measures are not enough and this has to be welcome advice for businesses large and small across the Tees Valley.”