Budget 2020 | how it affects salons and spas

The Budget was delivered today (11 March 2020) by the Chancellor Rishi Sunak (only a month into his new job) and the first Budget since Philip Hammond gave his fourth and last Budget in October 2018.

This 2020 one then, delivered at a time of much uncertainty and in the wake of a looming coronavirus threat, Sunak had a very positive tone, insisting that “any problems [it] creates would be short-term and would be dealt with”, while the “UK’s medium to longer term outlook is very positive”.

Here are the key points for salon and spa owners:

SSP and COVID-19 Corona Virus

The Budget announces measures surrounding COVID-19.

Employees will receive SSP from day 1 if they either have COVID-19 or have self-isolated because of it (rather than from day 4 with all other sicknesses).

Employers cannot currently reclaim SSP back from the Government, however they will now be able to do so if the SSP is paid to an employee who has COVID-19 or has self-isolated because of it.

Here are the rules:

• employer must have fewer than 250 employees
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• this refund will be limited to two weeks SSP per employee
• employers should maintain records of staff absences, but should not require employees to provide a GP fit note (see below)
• the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force
• while existing systems are not designed to facilitate such employer refunds for SSP, the government will work with employers over the coming months to set up a repayment mechanism for employers as soon as possible

The government has already issued guidance to employers, advising them to use their discretion not to require a GP fit note for COVID-19 related absences. This Budget announces that the government and the NHS will bring forward a temporary alternative to the fit note in the coming weeks which can be used for the duration of the COVID-19 outbreak. This system will enable people who are advised to self-isolate to obtain a notification via NHS111 which they can use as evidence for absence from work, where necessary.

National Insurance thresholds
Good news for salon owners, their staff and self employed chair/space renters

The budget confirmed the expected increase in the thresholds at which employees and the self-employed start paying National Insurance contributions (NICs) to £9,500 from April 2020.

Around 1.1 million people will be taken out of paying Class 1 (employed) and Class 4 (self employed) NICs entirely. This is the first step in meeting the government’s ambition to increase these thresholds to £12,500, which would save a typical employee over £450 per year.

Employer NICs
Good news for salon owners

Currently, the first £3,000 of Employers NIC is free each year. The budget has increased this to £4,000 from April.

This effectively reduces a salon owner’s staff cost by £1,000 per year.

Business rates
Good news for salon owners

From 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50%. On top of this, to support small businesses in response to Covid-19 the retail discount will be increased to 100%.

We await to see if Scotland and Wales follow.

The government is launching a fundamental review of business rates to report in the autumn. The Terms of Reference for this review are published alongside this Budget and a call for evidence will be published in the spring.

Pension tax
Good news for your staff 

Those earning around or below the level of the personal allowance £12,500 and saving into a pension (most likely through auto enrolment) don’t currently always receive tax relief in the same way those earning more do: it all depends on how their pension scheme administers tax relief.

The government has committed to reviewing options for addressing these differences and will shortly publish a call for evidence on pensions tax relief administration.

Capital Gains Tax
Bad news for salon owners

From 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief ER (which offers a reduced 10% rate of Capital Gains Tax when you sell your business for example) will be reduced from £10 million to £1 million, in response to evidence that it has done little to incentivise entrepreneurial activity and that most of the benefit accrues to a small number of very affluent taxpayers.

Given that salon owners include ER in their exit/retirement strategy, this could be bad news. Although for most, I think there will be no difference and a £1m limit might be quite adequate 🙂

Corporation tax
Bad news for salon owners

Corporation tax remains at 19% (despite it being promised 3 years ago to fall to 17% from April 2020).

Individual Savings Account (ISA) annual subscription limit
Good news for salon owners, their staff and self employed chair/space renters who have (or want to open an ISA)

The adult ISA annual subscription limit for 2020-21 will remain unchanged at £20,000.

However, Junior ISA and Child Trust Fund annual subscription limit – The annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.

MTD
Good news for salon owners, their staff and self employed chair/space renters

The government have decided to publish an evaluation of how MTD for VAT went before kicking off phase 2. This is most welcome. We’re not sure business has fully recovered from this initial debacle yet.

IR35

Named after the press release that originally brought the legislation in (and not such a big issue to the majority of Salon owners, see why here), the new IR35 rules are going ahead from next month. More importantly, it maybe a taster of how these rules (purely aimed at where a Ltd co sits between the worker and the salon’s Ltd co) may spill into the very popular self-employed stylist/salon arrangement. We continue to see…

• Posted on March 11th, 2020 in Payroll, Tax Advice