This afternoon, Chancellor of the Exchequer Rishi Sunak delivered his first, and a somewhat different, budget. The new Chancellor delivered a budget heavily focused on the rapid outbreak of coronavirus, with a £30 billion fiscal package targeted straight at small businesses and health services, to help protect the economy and companies during an uncertain few months. This fiscal boost will make the UK one of the best-placed economies in the world to deal with the global outbreak. It also, however, looks toward the future, and how Britain will be shaped as it takes its tentative first steps out of the European Union.
The budget announcement came after a morning of economic policy change, the likes of which haven’t been seen since the EU referendum. It saw a series of measures rolled out by Mark Carney, departing Governor of the Bank of England (BoE), to mitigate the threat of coronavirus and bolster the economy during the tough times ahead, whilst also providing welcome protection for SMEs, who are particularly vulnerable to downturns in trade, cashflow fluctuations, and staff absences.
In cutting the Bank of England base rate from 0.75% to 0.25%, the Bank’s Monetary Policy Committee hopes to increase confidence in business, as well as consumer borrowing and spending. Whilst the announcement won’t put much of a smile on the faces of savers, it’s great news for homeowners, especially those on variable or tracker rates, who could see substantial cost savings.
The BoE also announced a £100 billion cash injection, specifically for small business lending, making it easier and cheaper for SMEs to access working capital to support and protect their cashflow. There will also be a relaxation of capital buffer requirements, cash that banks have to hold against money they lend, although Mark Carney stressed that the extra capital is not to be used for bonuses or dividends.
These announcements, along with the Budget, are the clearest sign yet of a cohesive and co-ordinated policy strategy, and a reassuring response from the Bank of England and the Treasury, working together to protect the economy, businesses, and jobs.
Here are the key budget announcements for small businesses;
Suspension of Business Rates
Business rates for the next year will be suspended for small businesses with a rateable value below £51,000 in the retail, hospitality and leisure sectors.
Refund of Statutory Sick Pay Cost
For businesses with under 250 employees, the cost of providing statutory sick pay up to 14 days will be refunded by the government.
Coronavirus Temporary Disruption Loan Scheme
This will be introduced to support businesses directly affected by coronavirus and will offer loans of up £1.2m to cover the cost of salaries, bills etc.
Grants for the Smallest Businesses
Those businesses currently eligible for small business rates relief, typically micro-businesses and new companies, will be given access to a £3,000 grant per business.
National Insurance Threshold Increase
The National Insurance threshold will be raised £8,632 to £9,500 from next month.
Further Relief for Pubs
The Business Rates Discount for pubs, currently set at £1,000, will be increased to £5,000.
The lifetime limit on Entrepreneur’s Relief will be decreased from £10m to £1m in a move described by FSB Chairman Mike Cherry as a “sensible compromise”.
National Living Wage
The government will increase the national living wage to £10.50 an hour (two thirds of median earnings) by 2024.
Red Diesels Fund Tax Relief
Tax relief on red diesel funds pollution will be abolished for most sectors, but following calls from farmers, agricultural industries will retain this relief, along with rail and fishing.
Along with the announcement that, as expected, Corporation Tax will remain at 19%, there were also a host of other key announcements;
- National Insurance relief for employers that hire veterans.
- All alcohol duties and fuel duty will remain frozen.
- One-year extension to the retail discount to leisure and hospitality sectors.
- Investment in R&D will be increased to a record £22bn a year.
- £500m hardship fund to be given to local authorities to distribute to local people.