What does the 2020 budget mean for small business?

2020 budget

Chancellor of the Exchequer, Rishi Sunak, has announced the 2020 budget.

For small business owners, the budget can have a very real impact on profits, as changes in business rates, workers rights and taxes significantly impact the bottom line.

With the threat of coronavirus poised to rock the UK economy, this budget feels particularly timely.

Here are the key points that small business owners should take note of.

Coronavirus

The government has pledged £30bn to combat the effects of coronavirus. The pledge includes several policies aimed at supporting small businesses through the outbreak.

Companies with less than 250 people will be refunded for employee sick pay of up to two weeks per staff member.

Small businesses will be able to access a ‘business interruption loan’ of up to £1.2m.

The government will provide statutory sick pay to anyone who self-isolates, even if they aren’t displaying symptoms.

These measures should provide some reassurance to small business owners. Reclaimed sick pay can be used to hire temporary staff or improve cashflow if the virus brings trading to a halt. Whilst the government-backed loan will provide a much needed cash injection for those worst affected.

If you are freelance, statutory sick pay will give you some support if you contract the virus. Although it won’t alleviate other threats to your business, such as travel restrictions or event cancellations.

Business rates

Firms in the retail, leisure and hospitality sector with a rateable value of less than £51,000 will no longer have to pay business rates (commercial property tax). This measure has been introduced partly in response to coronavirus, and will be in place for one year.

Owners of small, independent shops, gyms, cafes and B&Bs will benefit from this tax relief at a time when the high street and leisure industries are under threat.

Pubs will benefit from a £5,000 discount on business rates, even if they have a rateable value above £51,000.

Companies who are exempt from business rates will also be eligible for a £3,000 grant. This will provide a small boost for small businesses.

Entrepreneurs’ Relief

Entrepreneurs’ relief will be reduced to a lifetime value of £1m.

This scheme was launched in 2008 to encourage UK business. It allows business owners to pay a reduced level of Capital Gains Tax (10%) when selling all or part of their company. In 2011, the tax relief was made applicable up to £10m, leading to criticism that it mainly benefited the super-rich.

Analysts feared that the termination of the scheme would discourage young entrepreneurs and affect small business owners near retirement, who may not have any savings beyond their company assets.

The restriction of this tax break to £1m will impact the wealthiest entrepreneurs, but leave most small business owners unscathed.

Alcohol and fuel duty freeze

Taxes on alcohol will not rise this year. A relief for bars, pubs and licensed restaurants.

The freeze on fuel prices should also keep the cost of goods delivery relatively flat. Great news if your business buys or sells consumer goods.

Broadband

The government has pledged £50bn to bring high-speed broadband to the whole of the UK.

Anyone who lives in a broadband blindspot will know that a bad internet connection can affect your ability to work flexibly and efficiently, especially in companies where business is mainly done online.

This scheme will be a boost for business owners in more remote areas of the UK, who currently either pay significantly higher rates for fibre optic broadband, or suffer the consequences of a bad connection.

Environmental taxes

A tax on plastic packaging will be levied from April this year.  Packaging that is less than 30% recyclable will be taxed at a rate of £200 per tonne. This tax will affect both manufacturers and businesses who import products with plastic packaging.

Workers’ rights

The national living wage for employees over 25 will rise by 6.2% in April, to £8.75 an hour. Wages will also rise for 21-25-year-olds to £8.20 an hour, and for 18-20-year-olds to £6.45 an hour.

Detractors have argued that this rise, which is four times the rate of inflation, will negatively affect small businesses who are struggling in the current economic climate. However, the government has stressed that other measures, including the scrapping of business rates for many enterprises, will help to combat the cost.

Rishi Sunak’s budget sends a clear message that Britain is open for business. Time will tell whether the investment will be enough to help smaller businesses through the difficult times ahead.