Highlights for small businesses
Chancellor Rishi Sunak announced yesterday the 2020 budget outlines the government’s tax and spending plans for the year ahead. Being the first budget of the decade, the first of the majority conservative government and the first since the UK has left the European union.
The Chancellor has also promised UK businesses £30bn in support to soften the impact of the Coronavirus introduced a range of measures, £12bn in direct support to businesses and £18bn in additional government spending to counteract the temporary downturn in the economy.
The personal allowance remains frozen at £12,500. This is the allowance before 20% tax is applied to your personal income. Also frozen the £50,000 threshold at which individuals start to pay the higher 40% rate of income tax. The rate of corporation tax is also remaining the same at 19%.
The chancellor confirmed plans to increase the threshold before employee’s national insurance contributions are due to £9,500 from 6th April 2020, with plans to ultimately increase this to £12,500.
Increase to National Living Wage
As already confirmed, from 6th April 2020, the NLW will increase to £8.72 from £8.21.
100% business rates discount for 12 months starting from 1 April 2020. The relief would be extended to any eligible retail, leisure or hospitality business with a rateable value below £51,000.
The £1,500 business rates discount for office space used by local newspapers in England will also be extended for five more years until 31 March 2025 and the government promised to bring forward legislation to provide 100% business rates relief for public lavatories in England from April 2020.
From Jan 2021 there will be a reduction in VAT on certain items, this to include women’s sanitary products, which are currently subject to VAT at 5%, it will become 0% VAT.
While from the 1st December 2020, the VAT rate on digital reading material such as e-books, e-magazines and academic journals will be cut from 20% to 0%.
The previous chancellor proposed limiting tax relief on pensions to 20%, however, prior to the budget, Mr. Sunak ruled out these changes. He did, however, announce reforms to the complicated way taper relief is applied for higher earners.
Use of Home as Office Claim
Outlined in the paperwork is that the flat rate claim for working from home will from April 2020 increase from £4 per week to £6 per week.
“IR35” reforms is going ahead
Changes to how “IR35” operates for large and medium-sized private sector businesses who engage freelancers, where the compliance requirements will move from the contractor to the client, will go ahead as planned from 6th April 2020.
In the lead up to the budget there was talk that changes to Entrepreneurs Relief (ER) were coming, with some comments that the chancellor would go as far as scrapping the relief entirely. Today, the chancellor announced that the relief will not be scrapped, however the lifetime limit will be reduced from £10 million to £1 million.
If you’d like to plan and balance between your personal and business tax bills, feel free to give us a call on 01214085132 or submit your query here