Small business directors and self-employed tradespeople awaited the announcement of the Autumn Budget 2017 with anticipation; the annual Budget often includes changes that can significantly impact the finances of small businesses. If you run a small business, make sure you know how the Budget is going to affect you this year.
Positive news on business tax
For the most part, the Budget offered positive news for business taxpayers throughout the UK. Many SME owners were concerned that the VAT threshold would be lowered in order to collect more tax from small businesses, but this has not been the case. The 2017 Budget actually includes a freeze on VAT and potential reductions in business rates:
– From next year, business tax rates will be indexed to the Consumer Prices Index (CPI), which could mean that rates effectively reduce by around 1% or so.
– The VAT threshold is set to freeze at £85,000 for a minimum of two years.
– Business rates will be reevaluated every three years instead of every five years after the next reevaluation. This should help to avoid steep increases in rates.
– The main Research and Development (R&D) tax credit rate will be increased to 12%.
– Local pubs rejoice! The Budget includes a £1000 business rates discount for local pubs.
– Corporation tax is set to stay at the same rate of 19%.
The decision to index business rates to the CPI, which was originally set to happen in 2020 but has been brought forward by two years, will be well-received. The move has already been applauded by the Federation of Small Businesses (FSB), who said: “It is a real step in the right direction for small businesses.” According to Gerry Biddle, the director of business rates at Deloitte Real Estate, this change will cost the Exchequer approximately £253 million next year alone (https://www.ft.com/content/9844dede-cf93-11e7-9dbb-291a884dd8c6). It certainly demonstrates that the Chancellor has made an effort to prioritise the needs of small businesses.
Investment for small businesses
Many small business owners have been bemoaning the UK’s lack of funding for small businesses for years now, and the 2017 Budget certainly made steps to address this shortfall. The government is planning to increase funding for business investments, which is great news for SMEs hoping to get a piece of the pie this year. £2.3 billion has been set aside for Research & Development, and £13 billion has been allocated to fund SMEs by the British Business Bank.
Scalable tech businesses will also be pleased to hear that the Enterprise Investment Scheme will likely be expanded, and the Chancellor also confirmed that a national retraining scheme will be introduced, which will focus on digital skills and construction. Investment in the future of the UK’s workforce can’t be bad news for employers who will one day be hiring those workers.
Fuel duty rise scrapped
There’s also good news for small businesses who rely heavily on their use of vehicles and fuel; the previously scheduled fuel duty rise, which was set for April 2018 and included both petrol and diesel, has been cancelled. On the other hand, older diesel cars will face higher excise duty from April 2018, but van owners will be exempt from this.
Increased funding for infrastructure can be great news for small businesses and traders who rely on the UK’s quality infrastructure to operate effectively. The Chancellor announced in the 2017 Budget that:
– A new £500 million fund will be set up for 5G mobile and fibre broadband
– £1.7 billion is scheduled to be invested in transport in cities
– £540 million is set to be invested in electric cars and electric vehicle charging points
No more ‘staircase tax’
Some of the best news to come out of the Autumn Budget is the announcement that the so-called ‘staircase tax’ will be scrapped. This tax, which would have penalised businesses with multiple offices linked by communal lifts, stairs, and corridors, by treating them as if they were more than one property, has long been thought nonsensical and unfair.
The scrapping of this tax will likely save many small businesses tens of thousands of pounds, and it’s been estimated that the tax would hit around 80,000 properties (https://www.ft.com/content/9844dede-cf93-11e7-9dbb-291a884dd8c6). And don’t worry if you’ve already been hit by this tax: Philip Hammond said that not only would the law be changed, but that any extra money already paid by businesses because of the tax would be refunded.
Employee wages and personal tax
As usual, the National Living Wage will see an increase again this year, this time by 4.4% which will make it £7.83 per hour from April 2018. National Minimum Wage will also increase to the following rates:
– £3.70 per hour for apprentices
– £4.20 per hour for 16-17-year-olds
– £5.90 per hour for 18-20-year-olds
– £7.38 per hour for 21-24-year-olds
Some small businesses may feel the stretch that this increase in wages will put on their finances; certainly, many small business owners do not feel that the rise in NLW is consistent with the rise their businesses make in profit. Unfortunately for small business owners, rises in minimum wage standards are an inevitability.
On the flipside, personal tax allowances will rise to £11,850 from April 2018, which is good news for everyone. The higher rate of tax threshold will also rise to £46,350 next year.
While it’s not all good news, there’s plenty to feel positive about for small business owners in the Autumn Budget 2017, and it’s certainly starting to look like the age of austerity is behind us.
If you’re a small business owner looking for a professional and knowledgeable accountant in Melton Mowbray, we may be able to help. Please don’t hesitate to contact us for assistance in paying business tax, accounting, and financial advice.