British Chancellor, Phillip Hammond, announced a “brighter future” for the UK economy in this, his first, and last Spring Budget, on 8 March 2017.
Going forward, the Chancellor will announce fiscal policy and changes to taxes in the Autumn Statement, which is going to become a full-blown budget (the first is later this year), with the Spring Budget, “a response to forecasts from the Office for Budget Responsibility”, according to the BBC. This is the final “major fiscal event” from the government in Spring.
FIRSTLY, GOOD NEWS. GROWTH IS ACCELERATING
The Treasury is predicting a growth forecast of 2% for 2017, up from 1.4%. There could be a slight slowdown in 2018, with forecasts currently set at 1.6%.
Although the government doesn't expect the country to have a surplus by the end of the decade, borrowing is reducing, from £58.3 billion in 2017-18 to £16.8bn in 2021-22. You could say that things are looking up, even with Brexit on the horizon.
SOME OF THE GOOD NEWS FOR BUSINESS OWNERS
- Small business reporting periods. A sigh of relief for business owners everywhere: Quarterly reporting for those below the VAT threshold has been pushed back a year, costing HMRC £280 million. Maybe this is a sign the Chancellor is listening more closely to the needs of small business owners.
- Business rates. Cuts totaling £435 million have been announced. Small businesses losing rates relief will benefit from a cap, to ensure rates don't rise by any more than £50 a month. Pubs with a rateable value of less than £100,000 will get a £1,000 annual discount, which should help 90% of pub owners.And, local councils can access a £300m fund for discretionary rates relief.
- As we expected, the personal tax allowance is rising to £11,500 in April 2017.
- An NS&I bond paying 2.2% over three years is going to be launched in April, to help those who want to save earn a higher rate of interest on savings up to £3,000.
- New funding has also been announced for the Midlands, continuing the Northern Powerhouse theme of the previous government, and a fund now exists for ‘disruptive technology’, including robotics and driverless cars.
NOW, SOME OF THE BAD NEWS
- Unfortunately, this budget is not as pro-business as the previous one.
- In April 2018, the Tax-free divided allowance is going to be cut from £5,000 to £2,000.
- HMRC is also going to increase NI contributions from self-employed workers, with Matthew Taylor of RSA investigating how to generate an extra £145m for the Treasury. An increase to class 4 NIC from 9% to 10% is set to come into force in April 2018, with it going up to 11% from April 2019 (‘on earnings of more than £8,060 a year.’) Whereas, Class 2 is going to be scrapped in April 2018.
- HMRC is also cracking down on tax avoidance, which includes stopping businesses converting capital losses into trading losses and fines for accountants who’s clients are caught by HMRC trying to avoid paying tax.
- A sugar tax is also being introduced, but at least alcohol and tobacco duties are unchanged.
SO, TO SUM THIS BUDGET UP
For small business owners, this budget was a mixed bag. We are going to get taxed more in the future, but the economy is still growing, which means the best thing we can do is to make hay while the sun is shining.
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.