In his first Autumn Budget, The Chancellor laid out his plans for the future of the UK economy. There were a few positives for small businesses. However, we felt more could have been done.
The Chancellor started off with reduced productivity and growth forecasts as low as 1.3% and 1.5% over the coming years. With Brexit occupying so many headlines, it’s a clear indication of the economic uncertainty we are currently facing as we get closer to our exit from the EU.
Recent research we conducted has found that many UK businesses aren’t prepared for this uncertain future, with those not adequately focused on their infrastructure at risk of going bust in the event of a recession. The Budget has missed an opportunity to provide some much-needed relief and reassurance to these business owners.
The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. The annual impact of this reduction is extra tax to pay totalling £225 for basic rate tax payers, £975 for higher rate tax payers, or £1,143 for those on the additional rate.
The Chancellor announced a further increase in the Income Tax personal allowance to £11,850 and £46,350 for higher rate tax-payers, from April 2018. The National Living Wage will also increase to £7.83 per hour at the same time.
The increase in national living wage to £7.83 is good news for those earning it. However, it can put pressure or some businesses already suffering downward margins and increasing costs. This could put a potential strain on the 15% of UK small business owners who have admitted in our recent research that they only have enough cash to cover themselves for a single month of overheads.
There was a heavy focus on technological investment which is invited in a UK post-Brexit economy. £500 million for 5G, fibre broadband, and AI will come as welcome news for UK small businesses.
The government is phasing in its landmark Making Tax Digital (MTD) initiative, which will see the introduction of a fully digital tax system. It was originally intended to be implemented between 2018 and 2020. However, following concerns raised by business and industry experts, there is a revised timescale for its introduction.
Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT, until April 2020 at the earliest. Then only if the software is proved to “work well”.
It was encouraging to see a further £2.3 billion allocated for investment in R&D and an increase of the R&D Tax credit to 12% from 11%. This will have effect for expenditure incurred on or after 1 January 2018. However, these changes only affect big businesses – the rate for small businesses remains unchanged.
Whilst the existing scheme for small businesses is still more valuable, it’s disappointing to see large companies getting a tax break, rather than smaller businesses. There are still big benefits for businesses to be had with R&D Tax Credits and we’d encourage anyone engaging in research and development activities to get in touch to see how much tax they might be due back.
From April 2018 there will be a 1% increase in company car tax for diesel cars that don’t meet the latest standards. Additionally, people using electrical charging points at work will not be charged benefit-in-kind tax from 2018.
From today, Stamp Duty will be abolished for all first-time buyers for properties up to £300,000. This will be a welcome introduction for those looking at entering the property market for the first time.
Great news for small businesses that the threat of a huge reduction in the VAT threshold did not materialise. It will remain at £85,000 for the next two years, giving small businesses some security.
The planned business rates switch from RPI to CPI will be brought forward by two years, to April 2018. This is a step in the right direction for the small businesses it impacts. However, this is only a small part of the costs and pressures facing these small businesses.
For those business owners impacted by the unpopular staircase tax, will be happy to hear it’s been scrapped. Some 80,000 small businesses faced bills of up to £15,000 when their business rates rose earlier this year, and many were unprepared for this. The Chancellor has confirmed business owners affected by the staircase tax will have their original bills reinstated.
Support for Pubs in England will continue with the £1,000 business rates discount carrying on until March 2019. The discount applies to pubs with a rateable value of up to £100,000.
Disincorporation relief will be abolished on 31 March 2018. Disincorporation relief allows a small company to transfer goodwill and an interest in land to its shareholders without a Corporation Tax charge arising on the capital gains realised on transfer.
We’ve looked at what the UK’s top-performing businesses are doing to thrive in these more challenging economic conditions. In our webinar, we shared the traits these businesses have and insights into what business owners need to focus on right now.
If you would like some advice on the highlights mentioned above, please get in touch on 0345 201 1580 or email email@example.com
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