/ HMRC

Spring Statement 2018: What Businesses Need To Know

Chancellor Philip Hammond gave an upbeat economic outlook for the country in the Spring Statement, just a few short months after a decidedly downbeat Budget, in November 2017.

Spring-Statment-2018

Growth forecasts, which were previously downgraded are up again, from 1.4% to 1.5% for 2018. Forecasts for 2019 and 2020 are currently unchanged at 1.3%.

Inflation is also falling, from 3% - now estimated to be 2% by the end of 2018. The chancellor is banking on wages now rising above inflation to stimulate some much-needed consumer spending, providing the economy maintains its current seemingly robust rate of growth.

Hammond is describing this statement as “a turning point in this nation’s recovery.”

Borrowing is Reducing

More good news is that public borrowing is set to be lower than expected. In 2017-18, the government is on target to borrow £45.2 billion, which is £4.7bn lower than predicted in Budget 2017. As a share of GDP, public debt is going to fall from 85.6% in 2017-18 to 85.5% in 2018-19.

The chancellor is still confident, despite the potential unknown impact of Brexit, that debt will continue to shrink to £21.4bn in 2021-22.

Collectively, small businesses play a huge role in the countries economy. And although this isn’t a budget, this statement serves as a good indicator which way the government and HMRC is moving towards the next budget, and the potential impact that could have on businesses.

In the Spring Statement for Small Businesses

  • VAT remains unchanged, with the £85,000 threshold. However, the government is going to consult on a new digital collection mechanism, which should make it easier for HMRC to collect payments from online sales.

  • As expected, the Tax-free personal allowance is going to increase to £11,850 at the start of the new tax year.

  • And as announced in the Budget, the higher rate threshold is increasing to £46,350.

  • The National Living Wage is rising to £7.83 an hour in April.

  • When it comes to pensions, the increase announced previously is going ahead. Rates for auto-enrolment (work place pensions) are going up: 2% for the employer contribution, and 3% for employees from April 2018. This will increase again, as planned, in April 2019 to 3% for the employer and 5% for the employee.

  • Multinational digital/tech sector companies could face tax changes in the next budget, with ideas for “fairer” taxation that should benefit UK small businesses announced in this statement.

  • Business rates revaluation is being brought forward, from 2022 to 2021.

  • Although cities with Metro Mayors are unaffected, other English metropolitan regions and cities are going to bid for the rest of the £840m in regional transport funds, which should ensure infrastructure improvements are implemented in some areas of the country.

  • £95m has been allocated to thirteen areas for a full-fibre broadband rollout. It is unclear whether this is an extra allocation, after £500 million was announced in Budget 2017.

  • More money is being put into house building across the country, with London and the West Midlands benefiting from large allocations.

  • Money is also being poured into skills, with £80m for businesses that take on apprentices, alongside £500m for T-levels (new technical qualifications across 15 sectors, for 16-19-year-olds), with £50m to help employers roll out placements.

  • The Treasury is also going to conduct a productivity review, to attempt to solve the countries productivity gap, and to find ways to reduce and eliminate the late payment problem that many small businesses face.

  • And please remember: GDPR compliance implementation is fast approaching, replacing the Data Protection Act on 25 May 2018.

With Brexit on the horizon and growth tentative, the chancellor isn’t making any further spending commitments right now. Most of this news is welcome for small businesses, a continuation of budget promises and a sign of continued progress. Reaction from small businesses and landlords has been largely positive, and we hope this growth will continue throughout 2018.

Disclaimer: We hope you found the information in this article useful and informative. Please remember that this is an article and is no substitute for professional advice on taxes, your business or personal finances