In December, a Conservative Party majority was voted into Parliament, and with it a manifesto of pledges and promises.
Here we look at what Boris Johnson’s majority Government might mean for small businesses in 2020 and beyond.
The pledge: support small businesses by reducing tax
Mr Johnson’s Government has promised to back small businesses by supporting high streets and alleviating employment costs.
This starts with the expansion of the Employment Allowance, a relief on National Insurance bills available only to small employers. According to the Government, the discount will be increased from £3,000 to £4,000, meaning employers will only pay National Insurance Contributions on amounts over the £4,000 threshold from April 2020.
Business rates will also continue to be cut for the smallest of businesses with the extension of the Retail Discount. The relief will cut business rates by a third for retail properties with a rateable value of less than £51,000 in each of the years 2019-20 and 2020-21.
The Corporation Tax rate, meanwhile, will be frozen for the foreseeable future. It was suggested that it would be reduced in April, but these plans seem to have been abandoned.
The pledge – incentivise research and development
The Government wants to build on the success of the Research & Development (R&D) Tax Credit scheme by increasing the tax credit rate to 13 per cent.
It has also planned to review the definition of R&D to prioritise innovative research into cloud computing, data analysis and boosting productivity.
The Entrepreneur’s Relief scheme will also get an overhaul after a disappointing take-up.
The pledge: clamp down on tax evasion
This Government will double the maximum prison term to 14 years for individuals convicted of the “most egregious examples of tax fraud”, as well as create a single “beefed-up” Anti-Tax Evasion unit in HMRC that covers all duties and taxes, from individual errors to deliberate noncompliance.
The pledge: support working families by reducing the tax they pay
This Government has promised to help get more people get into work, earn more, and pay less tax. According to the Manifesto, this means increasing the National Living Wage (NLW) to two-thirds of average earnings by 2024.
This starts in April 2020, when the NLW will increase from £8.21 to £8.72 for people over the age of 25.
National minimum wage rates from April 2020:
|Year||25 and over||21 to 24||18 to 20||Under 18||Apprentice|
|April 2019 (current rate)||£8.21||£7.70||£6.15||£4.35||£3.90|
For employers, this means adjusting the wages of your workers who earn less than the above rates, or risk fines for underpayment.
As part of this programme, the Government has also committed to not raise the rates of Income Tax, National Insurance or VAT. In fact, the Government wants to raise the National Insurance threshold to £9,500 from April 2020.
Mr Johnson says the “ultimate ambition” is to ensure that the first £12,500 earned is completely tax-free.
While welcomed by unions, critics have concerns over how small businesses will pay for the wage hike, with recent polls suggesting that business owners plan to increase prices, cut staff numbers and cancel investment plans.