The Autumn Budget 2017 was unveiled on Wednesday by Chancellor of the Exchequer Philip Hammond to a mixed reception. So, what should the UK’s small businesses and self employed now understand about changes to minimum wages, VAT, investment, and business rates?
We’ve put together a short summary of the key points in the budget that are set to impact small businesses, so you know what to expect over the coming months.
We all know that the situation in the UK has been uncertain since the Brexit vote. This has reflected by a growth rate of 1.5%, significantly lower than the 2% that was estimated. Although slower than expected, the economy is forecast to grow steadily for the following years.
GDP (Gross Domestic Product) forecasts are cut to 1.4%, 1.3%, and 1.3% for the next 3 years
£3bn has been set aside to prepare for Brexit
Because of slower growth, borrowing is forecast to fall in the coming years
Following the budget announcement, there has been a decision to improve the way that inflation is calculated: it will now be based on what households pay for consumer products, rather than the cost of those products to retailers. What this means is that prices won’t be rising as fast as they would with the old calculation in the coming years, and businesses could save up to £3bn a year.
Research and development
A new round of funding for small businesses and new ventures has been given the green light, with emphasis on the technology sector. This funding will look to foster entrepreneurship and the creation of more small businesses by providing easier access to funding. The government has also vowed to replace funding from the EU after Brexit.
There is £2.3bn set aside for R&D projects
The British Business Bank will receive £13bn to fund UK SMEs (Small and Medium Enterprises), which should make loans more easily available
Good news for all small businesses: the current VAT threshold is maintained at £85,000, keeping it the highest in Europe. Hammond has also set a consultation on improving the design of this system in the near future, but no more details have yet been given.
In efforts to ensure that online retailers pay the same amount of tax as traditional retailers, the government will be ramping up on tax scrutiny and expect an extra £200m a year.
Income tax basic rate is to rise to £11,850 from April, with the 40% threshold increasing to £46,350. This will equate to an extra £70 for a basic-rate taxpayer and £340 for a higher-rate taxpayer.
Company cars and fuel duty
The new budget announced a diesel tax increase, but it protects existing businesses (and those formed before the end of the tax year) who use diesel vehicles by only applying the increase to newly purchased cars after the tax year ends in April 2018.
The diesel supplement on tax for company cars will increase by 1%
There will also be an increase in tax on cars that are not up to green standards
The proceeds will fund a £220m clean air fund
In the coming years a strong investment round on infrastructure will give a push to the construction and transport industries across the country. Currently £1.7bn has been set aside for government projects on improving infrastructure and transport in city regions. The other big hit amongst young people is the introduction of a “Millennial Railcard” for those aged 26-30, which should give young entrepreneurs more freedom of movement.
The housing sector is being revitalised with new investments and policies. This is good news for construction companies, who will see more work coming their way, as well as landlords, who might see an increase in demand for flats as more areas are re-invigorated. Landlords should also be wary however that a 100% council tax premium on empty properties will be charged.
Stamp duty has been abolished for first-time buyers on residences worth up to £300,000, and on the first £300,00 of properties worth up to £500,000
An investment of £44bn is going to help build 300,000 houses each year by the mid 2020s
The budget supports private housebuilding with £8bn of loan guarantees
Small businesses hiring new and existing staff should be aware that national living wage has risen by 4.4% to £7.83 an hour.
Updated minimum wage for different age groups:
The Autumn Budget 2017 has certainly laid out the beginning of the UK-after-Brexit plan. Small businesses in strategic sectors (such as technology or construction) will be in the centre of the action. Although there are no big surprises in the budget, small businesses have been thrown some bones by being spared diesel tax increase, and the maintenance of the highest European VAT threshold.
The UK remains a country of entrepreneurs and, with more than 72,000 new business created last year according to the Office of National Statistics, there is no doubt that the number of small businesses will continue to grow. To find out how we can help you start your business check out our packages page and visit our help centre or give us a call if you have any questions.