Interest Rate Cut and 2020 Budget – What does it mean for you?

With today’s surprise interest rate cut from 0.75% to 0.25% the Bank of England are indicating the seriousness of the Coronavirus outbreak and it’s impact on businesses. With the health scare now officially declared a pandemic by the World Health Organisation, the aim of the interest rate cut is to make it cheaper for businesses to access finance to trade through this uncertain period.

This should also be welcomed by anyone who has a mortgage as Bank Rates should drop, although it’s unwelcome news for savers as they’ll earn diddly squat on their savings.

2020 Budget – Coronavirus measures

There were also a raft of emergency measures in the Budget due to the Coronavirus including abolishing business rates in England for companies in the retail, leisure and hospitality sectors with a rateable value below £51,000. All those told to self-isolate will be entitled to statutory sick pay and self-employed workers will be able to claim contributory Employment Support Allowance. Businesses with fewer than 250 staff will be refunded for sick pay payments for two weeks and SMEs get access to business interruption loans of up to £1.2m. The only real question for very small businesses is whether the paperwork will be simple enough to make it worth accessing this help.

eBay’s Rob Hattrell welcomed the business rates measures saying “We warmly welcome the support for SMEs and boosting exports, and I am particularly pleased that the temporary measures on business rates are backed up by a commitment to longer term reform. This will bring much needed relief to the smaller retailers that line the high streets up and down our country, and is critical for levelling up the economy in favour of small businesses and entrepreneurs in all our nations and regions.”

2020 Budget – Personal Taxation

There will be no change to personal tax allowances, but the threshold for National Insurance Contributions will rise from £8,632 to £9,500. The impact of this is that if you receive a pay rise you’ll pay tax on your entire pay rise, effectively, in what’s known as ‘fiscal drag’, increasing the take for the Government. Traditionally each year there has been a small bump in the tax allowance to take pay rises into account. On the plus side, the National Insurance change will benefit workers by about £85 a year.

It has been confirmed that then 5% VAT on women’s sanitary products will be scrapped.

2020 Budget – Business

There will be a review of High Street rates later this year which should help both small independent and large retailers alike. Businesses eligible for small business rates relief will get a £3,000 cash grant.

Entrepreneurs’ Relief (lower capital gains tax when you sell a business you’ve built up) will be lowered from a lifetime allowance of £10m to £1m.

VAT on digital publications (newspapers to ebooks) will be scrapped from December.

It has been confirmed that a new Digital services tax will be introduced at 2% on the revenues of marketplaces, search engines and social media platforms from from the 1st of April 2020.

There will be a Plastic packaging tax on the production and importation of plastic packaging, set at £200 per tonne of plastic packaging that contains less than 30% recycled plastic, from April 2022. Whilst this may not directly impact you, you may see a rise in the cost of products such as bubblewrap.

Naturally there are a ton of other measures in the budget which will impact sectors of the economy ranging from fixing potholes to high speed internet and transport. You can read the full 2020 budget here.