Budget 2020 - Employment Taxes

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The planned changes to IR35 as part of Budget 2020 have now be deferred by a year to April 2021, the government has made changes to Statutory Sick Pay and ESA  in response to Coronavirus and there is a review of EMI planned.

Stephanie Wilson - Partner and Head of Employment Taxes
Steph helps employers achieve cost savings by implementing more effective pay and benefits as well as effectively managing their employment tax and compliance risks. Steph enjoys providing real commercial insights into the everyday issues, stresses and synergies between finance, tax and HR professionals.  

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IR35 Private Sector Reforms Postponed to April 2021 - as part of the additional measures announced to support businesses and individuals to deal with the economic impacts of Covid-19, it was announced on 18 March that the implementation of the Private Sector IR35 Reforms would be postponed until April 2021. There is currently little detail in support of this announcement, however the key message is that this is a deferral of the new rules not a cancellation. Once more information has been provided by HM Treasury will be able to provide a more comprehensive view on the potential impact this change will have on affected organisations businesses and individuals.


Statutory Sick Pay changes for workers and employers and Employment allowance increase

As part of the Government response to Coronavirus, a number of measures have been introduced to Statutory Sick Pay (SSP) which are effective from 6 April 2020. The measures include:

  • All employees who self-isolate will be able to claim SSP
  • As a temporary measure SSP claims can be made from day 1 rather than day 4
  • Employees who are caring for someone who is self-isolating will also be able to claim SSP on this basis
  • Businesses with less than 250 employees as at 28 February 2020 will be able to reclaim SSP expenditure up to a maximum of two weeks per employee from the Government. This measure will commence from the date the new regulations for SSP are announced.

The current rate of SSP is £94.25 per week, rising to £95.85 from 6 April 2020.

SSP is currently payable to employees with earnings over £6,136 (£6,420 per annum from 6 April 2020). For employees below this threshold, such as those in the gig economy and the self-employed, the Government has announced additional measures that include:

  • The ‘New style’ Employment and Support Allowance will be payable for people directly affected by Coronavirus or self-isolating according to government advice from the first day of sickness
  • People will be able to claim Universal Credit and access advance payments where they are directly affected by Coronavirus, or self-isolating, without the current requirement to attend a Jobcentre
  • For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by Coronavirus or self-isolating ensuring self‑employed claimants will be compensated for losses in income

In addition to SSP changes, the Government also confirmed the planned increase in the Employment Allowance from £3,000 to £4,000 from 6 April 2020.

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Review of Enterprise Management Incentives

The Enterprise Management Incentives (EMI) scheme is an tax-advantaged share option scheme which aims to recruit, retain and incentivise employees in fast growth companies. The granting of EMI share options is often a key factor in the success of many smaller, fast growth companies.

The government wants the EMI scheme to help high growth companies scale up by recruiting and retaining the best talent. It will examine whether more companies should be able to qualify for the scheme. BDO welcomes the intention to extend the EMI scheme, given its beneficial impact on the SMEs and will participate in the consultation process.

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