This was advertised as the biggest budget for some years, a historic moment, and one delivered in the context of the growing Covid 19 crisis. Did it live up to expectations?
Well, the Chancellor certainly announced a lot of spending plans, they were hard to keep up with. There were not many changes to business or personal taxes, and most of the immediate spending was aimed at protecting the economy from the effects of the Coronavirus.
I will cover the virus measures and other measures separately.
His spending package on the Coronavirus was about £30 billion in total, a huge spending boost. There were no tax raising measures that would cover this in any meaningful way so presumably, the Government is happy to borrow and eat into reserves to cover.
He began by mentioning the ½% drop in interest rates announced by the Bank of England this morning and also some of the easing of credit measures. He also said that whatever funding the NHS needed, it would get.
- SSP (statutory sick pay) to be paid from day 1 not day 4 as previously. This had already been announced.
- Additionally, he now said SSP will be available for all who are advised to self isolate (not just those diagnosed as being infected).
- The government will meet costs for businesses with fewer than 250 employees of providing statutory sick pay to those off work “due to coronavirus” for up to 14 days
- Sick notes will be available via 111 and he would change the requirements to report to job centres and other universal credit requirements.
- Business rates for England’s retail, leisure and hospitality firms with a rateable value below £51,000 are suspended for a year.
- A £500m “hardship fund” is to be given to local authorities to help vulnerable people in their areas. The Treasury notes say that most of this is expected to be used to provide council tax relief.
- He also mentioned grants of up to £3,000 for around 700,000 businesses are to be provided via a £2.2 billion funding amount given to local authorities in England. This appears to be to compensate those smaller businesses which have small business premises that would not benefit from the rates reductions announced. The Treasury notes released after the Budget say that “This will provide £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs. For a property with a rateable value of £12,000, this is one quarter of their rateable value, or comparable to 3 months of rent. Most properties that are eligible for SBRR will have a lower rateable value, and so this will represent an even greater proportion of their annual rent.” It would appear that these grants are only for those with business premises. That is presumably why they are being dealt with by the local authorities (who deal with rates).
- A “temporary coronavirus business interruption loan scheme” for banks to offer loans of up to £1.2m to support small and medium-sized businesses. These would be guaranteed by the Government.
- Those on in-work benefits who get ill will be able to “claim from day one instead of day eight”.
- Time to Pay – The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. Her Majesty’s Revenue and Customs (HMRC) has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. These tailored arrangements will give a business the time it needs to pay HMRC to support their recovery while operating through any temporary financial challenges that occur. To ensure ongoing support, HMRC have made a further 2,000 experienced call handlers available to support firms when needed. HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties contacting HMRC or paying taxes due to COVID-19.
- The National Living wage (NLW) will rise by 6.2%, almost £1000 per annum, in a few weeks
- The NLW by 2024 should reach 2/3 of median earnings i.e. £10.50 per hour by 2024. For a full- time worker that is a salary of £19,110.
- The level at which national insurance is paid by employees will rise from £8632 per annum to £9500 saving over £100.
- No increase in duty on any type of alcoholic beverage, whisky, cider, beer or wine.
- The previously announced annual business rate relief of £1,000 for small pubs will be increased to £5,000.
- Fuel duty remains frozen for another year.
- Entrepreneurs’ relief – to date there has been a lifetime limit of £10,000,000 – this was reduced to £1,000,000 – one of the biggest tax raising measures in the Budget.
- R&D expenditure credit to be raised from 12% to 13% from 1 April 2020.
- Structures and buildings allowances to be raised from 2% to 3% from 1 April 2020.
- Corporation tax to stay at 19%.
- VAT on digital publications removed from 1 December 2020.
- He attempted to alleviate the current pension issues affecting doctors and other higher paid earners. The income level at which the £40,000 annual pension limit starts to be clawed back was raised significantly. The annual allowance of £40,000 will now begin to taper down for individuals who have an adjusted income of over £240,000. However, for those higher earners, the relief will now taper right down to £4,000 (previously it only tapered down to £10,000). So this may alleviate the issues encountered by doctors who are called in for extra sessions. Note he did not remove higher rate relief on pension contributions which many thought was a possibility.
This is very much a general summary. If you would like to discuss how any of these measures affect you personally please get in touch with us.
He announced that the next spending review will start today. We assume some of the spending announcements may be delayed until the Government is sure of the cost of the Coronavirus measures.
He also announced a number of green measures and (seemingly going the other way) a raft of road building and infrastructure announcements.