All eyes were on chancellor Philip Hammond as he announced ‘make or break’ plans for government spending over the coming year in the Autumn budget. Brexit uncertainty, concerns about productivity, improvements to infrastructure and business rates have all been playing on the minds of business owners.
So, what was announced in the budget and what does it mean for SMEs? Here’s our warts and all summary…
The planned business rates switch from RPI to CPI has been brought forward by two years to April 2018 and business rates will undergo revaluation every three years.
The chancellor said he had listened to concerns about the costs of up-grading business rates and stated that the change will represent a 2.3 billion pound cost. The announcement has been welcomed by business groups including the FSB.
It was announced that businesses affected by Staircase tax will have their original bill reinstated.
There was also news for pub owners with the discount for pubs (rateable value less than £100,000) extended by one year to March 2019.
Funding for scale-up businesses
The chancellor used this budget to reveal that the government are publishing an ‘Action Plan’, to unlock over £20 billion of new investment in UK scale-up businesses. This includes a new fund in the British Business Bank, seeded with £2.5 billion of public money.
He addressed the issue of European funding for businesses by claiming “we stand ready to step in to replace European Investment Fund lending if needed”.
A £1.7 billion transport fund was announced for city regions which could have massive implications for small business growth. The Northern Powerhouse, the Midlands Engine and elected mayors across the UK will benefit from the Transforming Cities Fund. Additionally £320 million is to be invested in former Redcar steelworks site.
There’s to be £2 billion for Scottish government, £1.2 billion for Welsh government, £650 million for Northern Ireland executive and a second devolution deal for the West Midlands.
£500 million was pledged for 5G mobile networks, fibre broadband and artificial intelligence and Hammond announced £30 million to improve digital connectivity on the trans-Pennine route.
A further £2.3 billion has been allocated for investment in research and development. £540 million has been earmarked to support the growth of electric cars, including more charging points.
Income tax is to be applied from April 2019 on digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction, raising about £200 million a year.
Hammond pledged to further tackle the skills gap for businesses to move forward in the future. He promised 8,000 new computer science teachers to be recruited at cost of £84 million and pledged £20 million to support FE colleges to deliver T-Level training.
He also announced a scheme to help people to retrain during their working lives. The priority, he said was digital skills and £30 million would be spent on distance learning courses.
The chancellor commented that Britain must become ‘a hub of enterprise and innovation’ and stated he wanted a Brexit agreement that ‘allows businesses to plan and invest with confidence.’ He promised a further £3 billion over the next two years for Brexit preparation. Whether this will be enough to calm the waters for businesses bearing in mind the huge task ahead remains to be seen.
The state of the economy
The growth forecast for 2017 has been downgraded from 2% to 1.5%. This is despite the government’s recent investment in productivity which was hailed as a priority this time last year. The annual rate of CPI inflation has been forecast to fall from peak of 3% to 2% later this year. Looking at employment it was stated that another 600,000 people are forecast to be in work by 2022.
A wage rise was promised for young people. The national living wage will be raised to £7.83 an hour from April 2018 following recommendations from the low pay commission. Business bosses will foot the bill. The basic rate income tax threshold will rise to £11,850 and the higher rate threshold will rise to £46,350 in April next year.
Hammond turned his attention to taxes for digital companies. He said income tax will be applied to sales abroad and that all online market places will be jointly liable with sellers for VAT.
There is to be tax break cuts for investors in early stage companies.
The Chancellor claimed to recognise that SMEs are under great “pressure” at the moment. Therefore, he will not reduce the VAT threshold for small businesses from £85,000. He will also extend the £1,000 discount for small pubs to March 2019.
This continues to disappoint said Philip Hammond. As previously mentioned productivity growth has been revised downwards. The chancellor said the government would extend the productivity fund for another year and expand the investment to over £31 billion pounds.
Over the next five years the government will provide a £44 billion capital investment to boost the housing market.
By the mid-2020s there should be 300,000 homes being built every year.
Diesel cars that don’t meet air quality standards will be hit by additional tax from next April. Hammond was keen to highlight that “no white van man, and no white van woman” will be hit by the measures.
The chancellor also unveiled extra funds and tax incentives for electric car drivers, including a new £400 million charging infrastructure fund.