As a large percentage of Coversure’s business involves insuring other businesses – be that providing liability, “commercial vehicle”:“https://www.coversure.co.uk/insurance/commercial-vehicle or general” business insurance policies”:https://www.coversure.co.uk/insurance/business – we’re well-attuned as to how Britain’s small businesses are faring. We know, for example, that 2019 with all the Brexit uncertainty, was a testing time for many. Equally we know that since the election and our formally leaving the EU that confidence has begun to rise and Coversure offices are seeing a surge of new business, property and motor insurance quotes coming in. This reflects the predictions of many economists that once Brexit was sorted that things would get back to normal, safe in the knowledge that – for good or ill – that the uncertainty was over.
Like any new government, the incoming administration made it clear that they would present a Budget as soon as was humanly possible. Sajid Javed duly revealed the date to be the 11th March, little suspecting that his number 2, Rishi Sunak, would be the one delivering it.
Budget’s have always had an impact on small businesses and this one looks like it could have a greater impact than most. Sunak is delivering the government’s first Europe-free financial plan since 1973 and is doing so on behalf of a government that seems intent on going on a spending spree. With interest rates still at historic lows making borrowing cheap and with Phillip Hammond’s no-deal war chest there for the taking, the new Chancellor has the opportunity, should he wish to do so, to present a marked departure from the last decade of austerity and give people something to smile about.
So, what is going to be in the famous red box and what could this mean for small businesses in the UK? Here’s a few predictions from the Coversure team.
National Insurance Rate Cut?
More money in people’s pockets means more disposable income which means more business for all. That’s the theory at least and in a world of record-low interest rates it may well be the case. The Tories pledged raise the N.I. threshold which would mean an effective tax cut for over 30 million employees. This one looks like a certainty, especially as it will help many ‘red wall’ voters.
Commercial Vehicles: Are Costs Set To Rise?
Motorists have historically never relished the Budget. I remember in the 1980s my father driving down to the nearest filling station as soon as the speech was over to fill up and so avoid the fuel price rise that would come into effect at midnight. In this respect business drivers – be they van, fleet, taxi or business car uses – have had a relatively easy time of it over the past decade with fuel duty has remained frozen. Drivers of diesel and other high polluting vehicles have seen sharp rises in vehicle excise duty as the government looks to get businesses to switch to electric vehicles, but in the main things have been stable.
This, however, looks set to change. Rumours have been circulating for a while now that in order to raise funds for the manifesto pledges that taxes will need to rise and this could be one. The Office for Budget Responsibility (the OBR) suggests that the expected 2p rise will generate an extra £4bn a year for the treasury. Obviously, this isn’t going to be welcomed by business drivers, and while in the short-term a falling oil price will mask its effects, in the longer term it’s another costly headache. On the upside it does provide yet another reason for CV owners to look to switching to electric vehicles.
One area of fuel duty change that has got farmers seeing red is reports that Rishi Sunak is planning to end the 11.1p/litre duty rate and charge users the full 57.7p/litre fuel tax. If implemented, average farm diesel prices would rise to more than 98p/litre – an almost 50% rise in the cost of fuel. This will be couched in terms of helping to protect the environment and in trying to encourage farmers to switch to electric vehicles. It will though have a major impact on the sector.
Business Rates Reform?
If there’s one thing on the wish list for many business owners – especially those who run a shop or other retail operation – its for something to be done about business rates. This outdated and, as many see it, unfair tax has been debated for years with little action actually being taken. With £30bn a year coming in from them, its not surprising that successive governments have been keen to leave this one alone. While the Tory’s manifesto promised a review and some relief for retailers and venues has been introduced, its (highly) debatable that the root and branch review that most people seem to think is in order will come in.
Entrepreneur’s Tax Relief Reform
Announced in 2008 as a way to incentivise people to establish businesses in the UK by reducing the rate of Capital Gains Tax on business disposal, entrepreneur’s tax relief has proved popular with many, though some have called it a perk for the rich. While abolition looks unlikely, many, including PwC believe it will be reformed with ease of access reduced and it being applicable to hi-tech, scientific and other key growth areas rather than to all. So, if you are looking to cash in your start-up business in 2020, it might be worth doing sooner rather than later…
Many retailers believe they are currently not trading on a level playing field and that online retailers are exempt from many of the burdens that they face. Add to that the millions lost in tax revenues by the tech giants thanks to their businesses being resident in tax havens such as Luxembourg and the Republic of Ireland and you can see the case for seeking more tax income form the digital giants. In his last Budget Phillip Hammond said a tax of 2% would be levied on global businesses with a turnover of over £500 come April and the view from Number 11 seems to be that this should happen.
Number 10 though may have other ideas. While the £400m this tax would raise is welcome and it would certainly be welcomed by those being hit by online competition, it would hit many US-based firms. At a time when the UK is seeking a free trade deal with the US that may go down about as well as a plate of fried chlorinated chicken at a National Farmers Union dinner. Expect this one to be watered down to homeopathic levels or delayed indefinitely.
We’re out. Brexit’s been done. Except it hasn’t, not yet. In this transition year nothing will change, but the ongoing trade negotiations are bound to have informed the Chancellor’s thinking. Many of the spending pledges that have been announced are meant as a cushion against the impact of a no-deal exit. With mood music around the negotiations currently being more Elvis Costello’s ‘Tramp The Dirt Down’ than Elvis Presley’s ‘Love Me Tender’, an amicable divorce may not be on the cards. This week, Michael Gove said that if there was no clear plan to a deal by June then the UK would walk away.
It will be fascinating to see how much reference is made to the EU and the most deal-sensitive sectors in the speech. Haulage, manufacturing and import-export businesses will all be affected should we leave without a deal so if new measures for these areas are in evidence, we may have an indication of what will happen next.
What Does the Budget Hold For UK Small Business?
Evidently quite a lot. The new administration has made much of its determination to get things done and this will be another chance for it to deliver. Overall business can expect a fairly benign few years in as much as billions are due to be pumped into the economy by way of large-scale investment projects such as HS2 and its £28.8bn road building plans.
Government’s – even ones as powerful as the UK’s – are subject to having their plans derailed, of course. The Coronavirus is expected to wipe trillions off the global economy, has sent stock markets tumbling and got central banks contemplating interest cuts – that would mean a negative rate for the Eurozone – and see ours reach new lows. It may also prompt more ‘fiscal easing’ (spending to you and I). And then there’ Brexit. As we say, it will be interesting to see if any hints are dropped regarding our future relationship as that could mean an awful lot for small businesses.
Like Some Business Insurance Help?
If you’d like some help protecting your business against what’s to come, then please contact your local Coversure office and they’ll be happy to give you all the assistance you need. To find your local Coversure, click here now.