In the final Budget before Brexit, Philip Hammond has revealed the government's tax and spending plans for the new financial year. The speech comes in the wake of the Conservative Party Conference earlier this month, in which Prime Minister Theresa May made the controversial announcement that austerity is coming to an end.
Themes that filled the afternoon speech included the extra £20 billion needed for the NHS by 2023, and of course the issue of how the economy is prepared for the UK’s exit from the European Union.
Hammond opened his speech with an optimistic statement declaring the Budget has a clear focus on minimising the tax taken from the wages of the 'strivers, grafters and carers' of the UK. There was lots of talk of an 'optimistic' and 'bright' future along with reaffirming Theresa May's claims of the end of a decade of austerity. But what does this mean for business owners across the UK?
- The UK's £85,000 VAT threshold has been frozen for another two years in a move to 'give businesses certainty.' The government will revisit options to reform VAT thresholds upon exiting the EU.
- A package of measures to tackle tax avoidance has been revealed, with the Chancellor highlighting R&D Tax Credit Scheme abuse. The HMRC will now be a preferred creditor in tax avoidance crackdown.
- From April 2020, IR35 rules will be extended to the private sector, with large and medium-sized private businesses having to abide by off-payroll working rules. This is part of a bigger package of rules for the private sector coming into enforcement in the next two years.
- Business rates bills for smaller English retailers with a rateable value of £51,000 or less are to be cut by one third over the next two years. This equates to an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes.
- The Annual Investment Allowance will be increased from £200,000 to £1 million for two years. Businesses will also be able to deduct 2% of the cost of any new non-residential buildings off their profits before they pay tax, effective from October 2018.
- The personal allowance threshold will rise a year earlier than planned, from £11,850 to £12,500, while the higher rate income tax threshold will rise from £46,350 to £50,000.
- The UK's EF direct lending facility will be extended by up to £2 billion.
- An additional £200 million will be provided to the British Business Bank to replace access to the European Investment Fund.
- The National Living Wage will increase by almost 5%, from £7.83 an hour to £8.21 an hour.
- The government will abolish the use of private finance initiative contracts (PFI) on future projects.
- The use of e-passport gates at UK airports will now include visitors from the US, Canada, Japan, New Zealand and Australia.
- Apprenticeship levy contributions by small companies will be halved from 10% to 5% in order to equip British workers with the skills to 'thrive and prosper.' This is part of the £625 million package to support apprentices, including additional funding for vocational training.
- A 2% UK digital services tax will be introduced to target tech giants generating £500 million a year in global revenue or more. Hammond reaffirmed that this isn't an online sales tax or a tax which will impact tech startups. It will take effect in 2020 and is expected to raise £400 million a year.
- The government will back another 10,000 entrepreneurs by continuing to fund the Start Up Loans programme until 2021.
- Following recommendations from the Financial Conduct Authority (FCA), the government will be providing more local support to benefits claimants.
- The government will also be working with the FCA on expanding access to the ombudsman service for larger SMEs.
- Despite being advised to abolish entrepreneurs' relief, the government is retaining it while amending the minimum qualifying period from 12 months to 2 years.
- Fuel duties will be frozen for the ninth successive year.
- Duties on beer, cider and spirits are to be frozen, protecting the profit margins of pub owners across the UK.
- £420 million will be available immediately to local highway authorities to tackle pot holes and bridge repairs.
- £675 million of co-funding will become available to help councils rejuvenate high streets.
- There will be a new tax on the manufacturing and import of plastic packaging which contains less than 30% of recyclable material.
In the 72-minute speech, the Chancellor celebrated the fact that 3.3 million more people are in work since 2010, with wage growth at its highest in nearly a decade. Hammond also confirmed an extra £20.5 billion will be made available to the NHS over the next five years, with at least an extra £2 billion a year for mental health services.
For more information on the Autumn Budget, and for a full transcript of the Chancellor’s speech, visit the.