As one of the most anticipated budgets in years, we wanted to focus on the key changes and how these will affect you and your business.
This is a big change for our clients, particularly as most fall into the category of business owners building up their business over their lifetimes, and who benefit greatly from this relief.
Entrepreneurs relief wasn’t abolished completely though – the limit was reduced from £10M to £1M. This will still be of benefit to many of our clients, but as its a lifetime limit, this could increase the tax paid by those retiring or selling their business this year.
There are some anti-avoidance measures to ensure that the relief is effective immediately, so if you have any concerns about this or want to discuss how this will affect you, please get in touch.
The budget confirmed that the planned reduction in Corporation Tax to 17% will not go ahead. The rate will continue at 19%.
The Employment Allowance is to increase to £4,000 (from £3,000). This reduces your employers NI bill and is available to most businesses. If you are eligible, please do make sure that you continue to claim this each year through your payroll software.
Research & Development
Although there were no changes in the budget to R&D for small or medium size businesses, it was very positive about their continued support of R&D in companies and have promised to consult on expenditure on data and cloud as the guidance in these areas can be confusing.
We’ve recently refreshed our website to reflect the work we do with companies in these innovative industries and are seeing some significant claims for R&D so please do talk to us if you think you might qualify.
National Insurance rise to £9,500
The rise in NI to £9,500 applies to employees NI only. We will still be recommending an optimum salary aligned with the secondary threshold which for 2020/21 is £8,788.
This ensures there are no claims required for employment allowance – which is not available to single director companies – and no payments to make for PAYE/NI, which can be a real headache.
There are also no changes to the personal allowance, income tax rates, dividend tax rates or the higher rate threshold of £50,000.
The planned changes to IR35 affects medium or large companies only, so if you are a small business using contractors, nothing changes. However, you may be contracting for one of those companies and this may affect how you will be paid going forward. The only mention regarding IR35 in the budget was confirmation that these changes are going ahead on 6th April 2020.
Pension Annual Allowance
The threshold at which pension annual allowance starts to be tapered will increase from £150,000 to £240,000.
Temporary Coronavirus Measures
SSP for 14 days
The government have confirmed that they will refund SSP paid to employee’s for the first 14 days of sick leave as a temporary measure. This is for companies with employees under 250 and is a temporary measure.
Time to Pay
HMRC have a new coronavirus helpline (0800 015 9559), specifically for people who cannot pay their taxes. They’ve made extra staff available and have committed to waiving late payment penalties and interest where a business experiences administrative difficulties due to the coronavirus.
Business Rates Reliefs
Temporary measures to assist businesses in the retail, leisure and hospitality sectors will mean that they pay no business rates for 2020/21.
Some smaller businesses receive small business rate relief and already do not pay any business rates. Instead they will be eligible for a small business grant of £3,000 to assist them with ongoing business costs.
There is little detail available at this stage as to how a business would claim this relief so we will have to wait and see.
If you are unsure how any of the Budget 2020 changes will affect your business, please chat to us. We’re always happy to help.