17th March 2020
In January 2020 we brought out our crystal ball and took a look at some of the measures which we anticipated would feature in the March 2020 Budget. Between then and now the rise of COVID-19 has had a significant impact on the financial landscape and some immediate support measures were announced in the Budget to help businesses effected by the coronavirus outbreak. We have detailed these in our full Budget summary report.
That aside, how did we do in our predictions and was this a good Budget for the South West?
Tax. We got this fairly spot on with a rise in the National Insurance primary threshold above which employees pay NI to £9,500. The secondary threshold which triggers employer NI contributions has not risen by as much with the new rate at £8,788 per year. However, the Chancellor has also raised the employment allowance [1] from £3,000 to £4,000; something which will help many of our small businesses in the South West in particular. There is also to be a one year employer NI holiday for those employing veterans in their first year of civilian employment.
Entrepreneur’s Relief and Property. We commented that entrepreneur’s relief was most likely to be reformed to benefit smaller businesses and this is the case. The relief has been retained but the lifetime allowance has been reduced to £1 million. This, the Government says, will still enable 80% of those using the relief unaffected; again an ongoing benefit for smaller businesses in our region.
As predicted the structures and buildings allowance [2] will rise from 2% to 3% with effect from the new tax year.
When it comes to business rates, whilst we predicted a reduction we did not predict the measures taken by the Chancellor in the light of COVID-19. For the 2020/21 tax year the business rates retail discount has been increased to 100% with the relief being expanded to the leisure and hospitality sectors. The business rates discount for pubs with a rateable value of less than £100,000 is also to be increased to £5,000 for the 2020/21 tax year. Local Authorities are also being given a grant which will enable them to support the smallest businesses which are currently in receipt of Small Business Rate Relief. Taken together these business rate measures will benefit small businesses across the South West.
R&D Tax Credits. We got this one right with an announcement of a rise in R&D tax credits from 12% to 13% and a future review of whether the definition should be expanded to include cloud computing and data.
Infrastructure and transport. The improvement to South West train lines mentioned in the manifesto was not specifically mentioned in the Budget although there was an indication that further transport projects would be announced in due course. Specific projects which were mentioned include £51 million for Plymouth, including £36 million for an iconic new Central Park cycling and walking bridge; as well as a pledge to get the Stonehenge tunnel done.
Perhaps of more immediate interest, the announcement of an increased pothole fund and further investment in broadband could benefit our rural areas in particular. The DTI are also to increase the number of advisors in the South West providing advice to exporters.
Thompson Jenner Partner Simon Lewis commented. “The Budget will go somewhere to helping South West SMEs in what is a particularly difficult and challenging time. We will be working tirelessly with our business clients to ensure that they are in the best position to benefit from some of the new measures.”
At the time of writing we expect further measures to be introduced to help businesses that are being effected by the coronavirus and we will update you when these are announced by the Government.
Our experienced and friendly tax team are always happy to help with any Devon business or personal tax issue. Why not give us a call on 01392 258553 or 01395 279521 to find out more about our tax planning services or to arrange a free initial meeting.
You can also download our Budget 2020 PDF newsletter
[1] https://thompson-jenner.co.uk/new-rules-for-employment-allowance/
[2] https://thompson-jenner.co.uk/claiming-the-new-structures-and-buildings-allowance/
Budget 2020 newsletter
