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Chancellor of the Exchequer Rishi Sunak announced his hotly anticipated first Budget yesterday. As coronavirus continued to cast its shadow over the British economy, with growth predicted to be at its lowest since 2009, he pledged to support businesses and pour funding into the NHS, 鈥渨hatever it takes, whatever it costs鈥�.

Day-to-day spending on public services will be 拢100 billion higher in cash terms, with the Chancellor reaffirming the government鈥檚 commitment to providing the NHS with an additional 拢33.9 billion per year by 2024. The Office for Budget Responsibility notes that this is the largest economic stimulus the UK has seen in nearly 30 years, seemingly marking the end of austerity. The Chancellor also announced additional investment into businesses, R&D and life sciences.

We鈥檝e taken a look at the full Budget and some of its implications for businesses.

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Key Talking Points of Budget 2020:

• 拢30 billion stimulus package, including 拢12 billion to offset the economic impact of the coronavirus outbreak;
• IR35 changes will go ahead;
• Corporation Tax to remain at 19%, cancelling a decrease to 17%;
• Business rates set to undergo a major overhaul; public-facing businesses will receive a tax holiday as coronavirus hits;
• A major increase in funding for R&D;
• Entrepreneurs鈥� Relief allowance cut to 拢1 million;
• National Living Wage targeted to hit 拢10.50/hour in 2024;
• Digital Services Tax to come into effect next month;
• Plastic packaging tax to come into effect in 2022.

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Coronavirus (COVID-19) Response

Unsurprisingly, the 2020 Budget places heavy importance on the COVID-19 pandemic and its effect on public health and the economy. 拢12 billion of the 拢30 billion stimulus package is specifically targeted at coronavirus measures.

• Statutory sick pay: in addition to being available from day one, statutory sick pay will be available to for all those advised to self-isolate鈥揺ven if they have not presented with symptoms.
• Self-employed workers will be able to claim contributory Employment Support Allowance from day one, rather than after a week.
• Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks.
• Small firms will be able to access of up to 拢1.2 million.
• Businesses likely to be hit hard by the outbreak, including caf茅s, shops, restaurants, cinemas and hotels, will pay no business rates in the coming tax year.

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Business Rates to Undergo Review

The Chancellor announced that the entire business rates system will undergo a major review, to report this autumn. For now, special measures have been introduced to help businesses to survive reduced business in the wake of coronavirus.

• A business rates holiday for retail, leisure and hospitality firms with a ratable value under 拢51,000 this coming tax year.
• Pubs will still have to pay business rates, but discounts will rise from 拢1,000 to 拢5,000 on pubs with a ratable value under 拢100,000.
• Firms eligible for small business rates relief will get a 拢3,000 cash grant.

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IR35 Changes Will Go Ahead

Controversial changes to IR35 legislation are set to go ahead, much to the disappointment of the self-employed people it affects. Though Sunak did not address the issue in his speech to Parliament, the full Budget document confirms that self-employed individuals working through a company will have to pay the same amount of tax as permanent members of staff. This is in a bid to crack down on 鈥榙isguised employees鈥� who are held to the same responsibilities as permanent staff.

At present, freelancers working through a company pay lower income tax and don鈥檛 have to pay National Insurance. From 6 April 2020, larger companies in the private sector will have to decide the status of their contractors. Smaller businesses鈥攖hose with a turnover of less than 拢10.2 million a year, balance sheet assets of less than 拢51 million, or fewer than 50 employees鈥攚ill not be affected.

• Large private companies will have to decide whether their contractors qualify for IR35, joining the public sector.
• On the other hand, the National Insurance threshold is to be raised to 拢9,500 from 拢8,632, providing a tax cut for 31 million people.

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Corporation Tax and Entrepreneurs鈥� Relief

A planned 2% reduction in Corporation Tax has been scrapped, but the rate will hold steady at 19%.

One key area of speculation this year was Entrepreneurs鈥� Relief, which allows entrepreneurs to pay just 10% tax when selling a business. While the scheme will stay in place, the lifetime allowance has been slashed from 拢10 million to 拢1 million.

Explaining the change, Sunak said that the existing allowance was 鈥渋neffective and unfair, with nearly three-quarters of the cost going to 5,000 individuals鈥�. With the new allowance in place, 80% of entrepreneurs who want to sell their business will be unaffected.

• Corporation Tax is to be frozen at 19%, reversing the previous plan to cut it to 17%.
• The Structures and Buildings Allowance for Corporation Tax will be increased from 2% to 3%.
• Entrepreneurs鈥� Relief will remain, but the lifetime allowance will be reduced from 拢10 million to 拢1 million.

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Greater Investment in Businesses

The chancellor made a number of pledges to boost funding for startups and scale-ups, as well as announcing an impressive 拢22 billion to be invested in R&D, a 拢4 billion increase from the Conservatives鈥� manifesto pledge of 拢18 billion.

鈥淭hat is the fastest and largest increase in R&D spend ever,鈥� said Sunak, adding that the percentage of GDP for research will be 鈥渢he highest in 40 years鈥� and a greater proportion of spending than that of China, the USA, France, or Japan.

• 拢130 million of new funding will extend startup loans.
• 拢200 million will fund the British Business Bank to invest in scale-ups.
• 拢22 billion will be invested in R&D by 2024-25.
• 拢200 million will be invested into life sciences.
• 拢5 billion in increased lending will be available for exporters.
• Dedicated trade envoys will represent the north, midlands, west of England and Wales.

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Employment and National Insurance

Business owners and employees alike will see a higher threshold before they pay National Insurance. An ambitious target of 拢10.50 for the National Living Wage (formerly National Minimum Wage) was announced for 2024.

• The Employment Allowance for Employer National Insurance Contributions is increasing from 拢3,000 to 拢4,000.
• The National Insurance threshold for employees is to be raised to 拢9,500 from 拢8,632.
• National Living Wage will rise to 拢8.72 from 拢8.21 for over-25s on 1 April. It is targeted to hit 拢10.50 per hour and be extended to over-21s by 2024.

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Changes to VAT and Duties

Little change in this area, although as some predicted, VAT on sanitary products and digital publications will be scrapped following Brexit. A new will be introduced next month, gleaning 2% of revenue from online businesses that derive value from UK users.

• Tampon tax will be abolished from January 2021.
• VAT will be scrapped on digital publications such as newspapers, academic journals and e-books from 1 December.
• The increase in alcohol duties has been scrapped.
• Fuel duty has also been frozen.
• A Digital Services Tax of 2% on revenues of search engines, social media services and online marketplaces will be rolled out on 1 April.

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New Sustainability Measures

Sustainability was another key talking point for this budget. Following calls to ban or tax packaging that cannot be recycled, manufacturers and importers whose products have less than 30% recyclable material will be charged 拢200 per tonne.

• The new 鈥榩lastic packaging tax鈥� will come into effect in April 2022.
• A new 拢100 million scheme will help households and small businesses invest in low carbon heating systems.
• The levy on gas will rise but is frozen on electricity.
• Diesel subsidies will be scrapped 鈥渇or most sectors鈥� in two years鈥� time but will remain for farmers and rail operators.
• An investment of 拢500 million into the rollout of rapid charging hubs will ensure that e-vehicle drivers are never more than 30 miles from a hub.
• There will be a consultation on plans to change Vehicle Excise Duty, better known as road tax, in an effort to link more closely with carbon emissions.

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A Major Boost in Infrastructure

Record amounts will be invested in Britain鈥檚 roads, railways, broadband, housing and research鈥攎ore than half a trillion pounds (拢640 billion) will be invested over the next five years. While much of this focuses on public needs, including a 拢1 billion fund to replace flammable cladding on buildings, businesses are set to benefit from improved transport routes.

• 拢27 billion will be invested between now and 2025 to improve vital transport routes.
• 拢5 billion will be invested in broadband to help expand rural connectivity.
• 拢2.5 billion will fix potholes and resurface roads over the next five years.