Budget 2020 - A pot-hole free drive in your electric car through magic money trees?
There is much to be happy about in today's Budget, where the magic money trees are well and truly thriving!
Businesses will benefit from many announcements, particularly those who trade from a property, have one or two employees, and need a new car!
Business rates are abolished for a year for rateable values of less than £51k and these same businesses will receive a £3k grant, as a response to the Coronavirus but it's also part of the overall picture of dealing with competition from Amazon and other online retailers.
Where possible and appropriate for your business model, businesses going forward may need to embrace online retail further. Having said that, many can provide a niche, local, personal service perhaps relying on online marketing, such as Facebook, but not online sales.
With the money saved, and assuming you needed one already, an electric car is very tax efficient. The 100% write off against your tax bill has been extended beyond 2021 to 2025 with no benefit in kind until March 2021 and then minimal after that. VAT still can't be recovered, however, apart from 50% through leasing.
Your employees earning over £9,500 will pay less national insurance from April 2020, but you'll still pay 13.8% national insurance on their salaries over £8,788 with a £4k offset from the increased employer annual allowance of £4k. For example, if you have one employee earning £37,774, the £4k annual allowance will offset all the employer national insurance due. Even employ a veteran where you save employer's NI for a year. And remember to claim the statutory sick pay for up to 2 weeks if your employees need to be away from work due to the Coronavirus.
If you're a sole trader, your Class 4 national insurance of 9% will, from April 2020, only kick in after you've earnt profits of over £9,500. If the Corornavirus reduces your profits, however, remember to claim Universal Credit. You may need to pay Class 2 national insurance voluntarily to maintain your state pension credit.
If you also carry out Research and Development, R&D, the new restriction on cash refunds for loss making businesses is still coming in, but delayed until April 2021, and if your claim is less than £20k, there'll be no restriciton at all. So, as you were! Carry on with R&D and cash claims even if you are just a one or two director company on minimal salary.
If your business survives the Coronavirus, perhaps with funding help from HMRC Time To Pay or your bank and one day you're ready to sell your business, you'll pay capital gains tax of 10% on the first and only £1m business capital gain in your lifetime, and 20% on the rest of the gain. Many small businesses are sold for less than £1m, so this is a welcome compromise effective immediately.
Some of the good news is ofset by confirmation of the corporation tax rate remaining at 19%, but also HMRC being given 1,300 more staff to get tax HMRC believes it's entitled to! Be careful you don't get caught up in that, where HMRC have been known to go for low hanging fruit, possibly hanging on a magic money tree 😀, rather than trickier cases.
Stay well!