30 Oct 2018
We reflect on the new Budget
Overall, this year’s budget seems more positive than previous years’; it has ticked a lot of boxes for many – small businesses, health, schools and individuals – but the devil’s in the detail and it’s still early days to see exactly how many of these promises will be develop, as a number are based on future consultations – and when they will materialise..
The Chancellor does seem to have opened the taps with a number of measures to support small businesses, particularly with business rates reduced by a third for two years for those with a rateable value under £51,000, which should also help reinvigorate our high streets as 90% of shops should also fall into this bracket.
Employment and skills have also received a boost with the halving of employer apprenticeship levy from 10% to 5%.
Disappointing changes have been made to Research and Development tax credits, as businesses will now have to have paid PAYE before being able to claim. However, this may be rather shortsighted as, in our experience, many businesses claiming this relief are often very small and solely staffed by the directors who take their salary through dividends rather than PAYE. This change, and the resulting reduction in R&D claims, may make many of these businesses unviable to run.
Similarly, Entrepreneurs’ Relief has had the holding period for shares doubled to two years – delaying this release of funds may be problematic for serial entrepreneurs needing to release their funds more quickly for their next project.
What will be widely applauded, is the introduction of the UK digital services tax from April 2020, applicable to digital platform businesses with global turnover in excess fo £500m – and we all know who they are! It was certainly a shrewd move to apply it to turnover and not profit. With a growing digital market, the traditional tax base is shrinking, and so this move is one to help the government keep up and try to ensure fairness, by bringing in as much revenue as they can from these businesses.
For individuals, the increase in personal allowances should benefit 32,000,000 people by approximately £130 a year, with an increase in the threshold for higher rate tax payers too. With an increase in the Living Wage, and Universal Credit claimants seeing an increase of £630, everyone seems to have benefitted in this Budget.
It’s good to see the government sticking to its promises too, with the tax on single use plastics being consulted on, and the £10 million funding pledge for Air Ambulances, which currently receive no government funding, is refreshing too. Similarly, with the announcements on extra funding for mental health, veterans, schools and social care, many more aspects of our community will ultimately benefit.
There’s a saying that taxation is all about getting the largest amount of feathers from the goose with the smallest amount of hissing, and that seems to be what Philip Hammond is doing with this year’s Budget.