There was a lot of content, but here are a few highlights from yesterday’s budget that I believe may impact you the most. I’d be really interested to hear your take on yesterday’s announcement too.
Before the budget announcement even got underway yesterday, the governor of the Bank of England, Mark Carney, in the final major act of his tenure before handing over to Andrew Bailey on Monday, cut interest rates from 0.75% to 0.25%.
This was an emergency stimulus to the economy, to counteract the inevitable reduction in consumer spending during the Coronavirus outbreak. This would pre-empt a budget which would in itself be dominated by the virus.
Delivered by our newly appointed Chancellor Rishi Sunak, the spending plans announced were far removed from the austerity measures we have grown used to in recent budgets. It highlighted a stark change in political fashions, whereby vast sums of money were promised to 1) cope with the outbreak of COVID-19; and 2) deliver infrastructure projects across the country.
‘Levelling up’, a familiar mantra since the December general election, a corner stone of this Government’s economic policy, was evidenced again in this budget. Much of the investment promised, will be concentrated in the Midlands and the North of England.
The budget however was criticised for not doing enough to repair the damage of (arguably unavoidable) austerity and under investment since 2010 on our public services. It’s freeze in fuel duty, £27bn investment in the road network, and lack of draconian measures to tackle carbon emissions, led some to voice their displeasure that climate change was not higher on the agenda.
Emergency measures to combat the effect of the Coronavirus on the health and economy of our country include:
Statutory sick pay (SSP), entitlement for all who are told to self-isolate. Small businesses (<250 employees) will be able to reclaim 2 weeks’ worth of SSP from the Government. SSP rate currently £94pw;
Employment support allowance (ESA) available to the self-employed;
Business rates abolished for the smallest premises for businesses in retail, leisure and hospitality.
The rates and allowances for income tax and NI determine the amount of take home pay for employment and self-employment earnings. The Autumn 2018 budget accelerated the planned increase in tax free thresholds, so changes were relatively minor, albeit positive, in this area.
The personal allowance, the amount of qualifying income an individual can earn before income tax is charged, remains unchanged at £12,500. The basic and higher rate upper thresholds also remain unchanged at £50,000 and £150,000 respectively, with charges holding at 20%, 40% and 45% for basic (BR), higher (HR) and additional (AR) rate taxpayers respectively.
The National Insurance primary threshold (level at which NI contributions start) has increased from £8,632 to £9,500. The National Insurance upper earnings limit (the point at which contributions are calculated at 2% rather than 12%) is unchanged at £50,000.
For employers, the employment allowance (and NIC rebate) has increased by £1,000 to £4,000 but with some changes to the qualifying criteria.
I will be in touch with Limited Company proprietors separately, regarding withdrawal strategies and employment allowance eligibility for the 20-21 tax year.
No changes to the rates or tax free allowances for corporation tax (Rate: 19%), dividends (Rates: 7.5% BR / 32.5% HR / 38.1% AR), savings (Allowances: £1,000 BR / £500 HR / £0 AR), capital gains (Allowance: £12,000, normal rates: 10% BR / 20% HR and residential property rates: 18% BR / 28% HR), or VAT (Turnover threshold: £85,000, standard rate: 20% and reduced rate: 5%).
All categories of earners see an increase in the national minimum wage. For over 25s, the increase is 51p from £8.21 to £8.72.
There was no mention of proposed IR35 reforms in the Chamber, however the body of the supporting text confirms that the rollout of these reforms to the Private and 3rd sectors will go ahead.
Whilst most support the spirit of these reforms, few will say that the implementation has been anything other than troublesome. Given the ambiguity of what constitutes a genuine business to business relationship, end clients are understandably nervous about their potential exposures. This has led to reports of blanket assessments on existing engagements, blanket bans on future Ltd Company engagements, a reduction in or offshoring of projects, contractor walkouts, and a rise in what is deemed as ‘zero rights’ employment.
We will see how the market responds in the coming months.
The government did signal the importance of entrepreneurship. Many were expecting Entrepreneur’s Relief (a favourable capital gains tax rate applied on disposal of shares) to be abolished, however this was retained, albeit with a reduction in the life time allowance. This is potentially huge for those considering the futures of their Companies at the moment.
At this trying time, perhaps some good news is that duties on all categories of alcohol will be frozen! Her Majesties Treasury rightly siting the importance of pubs for our communities. No such olive branch for the smokers among us though.