The 2020 Budget has been named the biggest Budget giveaway in 30 years, but did we expect this? Let’s think back to 2015 when George Osborne was the Chancellor of the Exchequer. His main priority was deficit reduction, which I recall Rishi Sunak agreed with. Fast forward five years and it appears he has changed his mind with the national debt to hit £2 trillion by 2024. To put this into perspective, a high budget is usually around £10bn per annum but for the forthcoming years this is expected to be between £17 – £41bn, not factoring in the ‘second Budget’ and the coronavirus, but how does the SME fare in this biggest Budget giveaway?
From the 6 April 2020 the national insurance threshold will rise from £8,632 to £9,500 with a typical employee saving £104 and the self-employed saving around £78. This is a step closer to the government’s plan to align the national insurance threshold with the personal allowance of £12,500. The employment allowance has also been increased from £3,000 to £4,000 per annum from April 2020 for businesses to help wipe out some of the 13.8% employer’s national insurance liability.
With the impact of the coronavirus, and the uncertainties in the economy, many businesses are experiencing cash flow issues due to increased costs and a fall in sales and spending. The Bank of England had announced that very morning an emergency cut in interest rates from 0.75% to 0.25% along with a plan to free-up billions of pounds of lending power to support businesses.
The Budget however, has announced a number of other measures to assist businesses. The government will refund, in full, statutory sick pay for employees who are off ill due to the coronavirus, and for up to two weeks, which is worth more than £2bn to small businesses. Small retail business, for a period of one year, will see business rates abolished completely for properties with a rateable value of under £51,000.
Whilst the corporation tax rate was set to be reduced to 17% from April 2020 it is not surprising with the governments planned spending that this will remain at 19%. The UK’s rate still remains the lowest in the G7 and G20.
Clearly, the Budget and announced measures yesterday will try to assist SME’s at this difficult time but it seems the government may need to do more in order to help businesses bounce back. Perhaps, as Alistair Darling introduced some 12 years ago, another temporary cut to the VAT rate is needed to help bring forward expenditure and to kick start the economy?