The 2020 Budget: Covid-19 Aid, Plastic Tax and NHS Funding
Tapestry by Charlotte Edey
In this article we will be covering the need-to-know information about the yearly, as announced by Rishi Sunak on 11th March 2020.
As expected can be expected , the Covid-19 pandemic plays a major part in this years budget. A large section of the budget has been put aside for financial aid and support to the many financially affected by Covid-19.
CORONAVIRUS EMERGENCY FUNDING
NHS Emergency funding
An emergency fund of £5billion will be injected into the NHS to help aid the influx of patients during the Covid-19 outbreak. This is through the virtue of a 3% increase in investment, which equates to a total of £129.9 billion in 2020.
Emergency Financial Relief for Businesses and Self-Employed Workers
The budget has made financial relief available for businesses, self-employed individuals, and people who will not be able to work during the COVID-19 pandemic. Below we have listed some of the reliefs mentioned in the 2020 Budget.
Coronavirus Job Retention Scheme
Announced after the official budget, this scheme was set up to enable companies to keep their workers on the payroll, thus lowering the levels of unemployment that would have been a direct result of the coronavirus pandemic. It offers PAYE employees 80% of their pay through the means of government-backed loans. Initially this is only for a period of 3 months but may be extended depending on how the pandemic progresses.
Self-Employed Offered 80% of Earnings
In a similar move to the Coronavirus Job Retention Scheme (CJRS), the aid offered to self-employed individuals equates to 80% of monthly earnings worth up to £2,500 a month. A key difference in the legislation lies within the payment schedule. Where the CJRS encourages employers to pay their workers on a regular basis, self-employed individuals will receive one lump sum payment in June 2020. This leaves 3 months where a self-employed individual could technically have no source of income.
Time to Pay
Self-employed workers and business owners may be able to delay some tax payments. We have listed them below:
· You May Defer VAT payments due before 30th June 2020 until 31st March 2021
· You May Defer your Self-Assessment Payment (Income Tax) due in July 2020 to January 31st, 2021
The HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties contacting HMRC or paying taxes due to COVID-19.
Business Rates Reliefs
The government has increased the Business Rates Retail Discount[4] from 50% to 100% for 2020-21. This relief has also been expanded to the leisure and hospitality sectors[5]
Small Business Grant Funding
Small businesses that pay little to no business rates also fall under the broad umbrella of government aid. To support businesses that are claiming Small Business Rates Relief(SBRR) or Rural Rate Relief, the government has committed to providing £3,000 grants to all that are currently eligible. This £2.2 Billion funding is said to compensate around 700,000 businesses facing financial crisis at this time.
Coronavirus Business Interruption Loan Scheme
The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme. This scheme will support SME’s to access loans, overdrafts, invoice finance and assets finance. The government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The Scheme will support loans of up to £1.2 million in value.
Statutory Sick Pay (SSP) from the first day of sickness
Prior to the coronavirus pandemic businesses could not claim SSP until a worker had been self-isolating for 4 days. This legislation has temporarily altered this rule; with the aim of making sure individuals can take precautionary measures (self-isolating), without losing all financial income.
‘New style’ Employment and Support Allowance
The government altered ESA to make the relief more accessible, to a wider percentage of the general public. This is to accommodate for the increased amount of people facing financial crises during the pandemic. Details on the changes include:
People will be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 (or self-isolating), without the current requirement to attend a job centre
For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by COVID-19 or self-isolating according to government advice for the duration of the outbreak.
The Hardship Fund
A £500 Million fund has been set up to provide ‘council tax relief to vulnerable people and households to help those affected most by coronavirus’. This fund will go to local authorities in England, and will reduce council tax bills for working-age people receiving local council tax support.
OUTSIDE OF CORONAVIRUS
Although the Coronavirus played a major role in the budget, it was by no means the only topic spoken at length on. Other discussions included:
Raising the National Living Wage
The National Living Wage (NLW) has risen from £8.21 to £8.72. This is alongside the chancellor's announcement that the government is planning to raise the NLW to £10.50 by 2024. Also the government plan on reducing the qualifying age for NLW from April 2021, the age drop will be from 25 to 23.
National Insurance Contributions Threshold Raised
The threshold for NI contributions has risen to £9,500 from £8,632. This will save the typical employee £104 a year, or a typical self-employed person will get a boost of £78.
Income Tax Allowance Unchanged
The Income Tax allowance for 2020-21 is set to stay at £12,500.
Entrepreneurs Relief Cut
Business Asset Disposal Relief , aka The Entrepreneurs’ Relief, lifetime allowance was slashed from £10m to £1m, reducing the tax saving to £100,000.
Change to Pension Tax Regulations for High Earners
The income threshold at which tax relief on pension contributions starts to shrink is set to rise from £110,000 to £200,000. Whilst this increase in threshold will provide further tax relief for some high earners; for people earning above £300,000, the minimum floor for the relief has now been reduced from £10,000 to £4,000.
Tampon Tax Scrapped
The notorious 5% VAT on women's sanitary products, known as the tampon tax, is to be scrapped
Support For the Self-Employed
The government states that “it will improve access to finance and credit for self-employed people, by extending funding for the Start-Up Loans program as above and by exploring how to improve the guidance available for self-employed people applying for a mortgage.
Societal Investments and Predictions
The government also announced a plethora of investments in public health, infrastructure, and culture alongside forecasts for the economy by the Office for Budget Responsibility (OBR).
Funding the NHS
Within the budget, the government has stated that its 'number one spending priority ' is the NHS. This is with the aim of a £34 billion increase in funds directed to the NHS by 2024. However; The Kings Fund have commented that the “long-term funding deal… excludes important areas of the Department of Health and Social Care budgets such as capital investment, public health and the education and training of NHS staff”.
Greener Economy
The government pledged investment into the electric-vehicle charging infrastructure, which will ensure drivers are never further than 30 miles from a charging station. This was alongside providing consumer incentives for ultra-low emissions vehicles and reducing tax for zero-emissions vehicles. The Plastic Packaging Tax is also slated to come into fruition from April 2022.
Research and Development Tax Relief
There was an emphasis put on investment in Research and Development (R&D). This investment planned is the largest and fastest ever expansion in support of researchers and innovative businesses, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France, and China.
Schools
The budget pledges £29 million per year increase 2023-24 to support primary school PE teaching and help schools make the best use of their sports facilities. This is as well as £90 million per year to introduce an Arts Premium from September 2021 to help schools provide high-quality arts programs and extracurricular activities for pupils.
£250 million Cultural Investment Fund
The government has announced a Cultural Investment Fund for cultural projects, libraries, museums and the creative industries. The Arts Council England commented on the fund stating that it allows “cities and towns to invest in creative, cultural and heritage initiatives that lead to culture-led economic growth and productivity”. The £250 million investment will be delivered by DCMS, with Arts Council England having a key role in distributing the fund.
Youth Investment Fund
The Budget has committed £500 million into a Youth Investment Fund to build new youth centers, refurbish existing youth facilities and provide high-quality services for young people across the country. The government expects that at least 800,000 young people will benefit from new or upgraded youth facilities.
National Museum Maintenance
£27 million has been allocated for the critical maintenance work on the National Museums’. The National Museum Directors Council has stated that the news is ‘really promising’ as museums in the country have been in “desperate need of investment”. This comes on top of 2019’s announcement of a £44 million investment, with the same allocation.
Economic Predictions by the OBR
The OBR has predicted that economic growth will be down this year compared to last year as a result of the COVID-19 outbreak. They are predicting growth of 3.0% compared to 2019’s 3.6%. “This includes an assumption that the outbreak would be "relatively limited", it is already clear that this is not the case, thus it can be assumed growth is likely to be less than predicted.
What’s Next?
The autumn budget is will likely be in November or December 2020, and will probably focus heavily on the government’s outlines for an economic recovery process from the COVID-19 outbreak. We aim to keep you up to date with any developments in the coming months.
We will be releasing further articles going further into depth on each of the points made in this article.
AS CHOSEN BY AMERICANS AND CREATIVE INDUSTRY PROFESSIONALS WORLDWIDE
We are a boutique accountancy firm that specialises in US and UK taxation. Set up over 10 years ago, Bambridge Accountants London was founded with the goal to simplify and optimise the tax filing process for creative professionals and US expatriates.
We have since become the leading American Accountancy firm for US Expatriates and gained a reputation within the creative industry for our 'outstanding' service and 'specialist understanding of the unique tax complexities for creative self-employed workers.'