The Budget and Small Businesses
Impact of the budget on small business owners
The Chancellor of the Exchequer Phillip Hammond delivered the spring budget last week on 8th March.
In it, he remarked that “Britain is open for business” and that he was “listening to the voice of business”. Overall, this budget was a mixed bag for small businesses, with some wins but also some fairly significant losses. We outline the key points here.
There has been a massive backlash over planned increases in business rates across the country, with many arguing that it unfairly favours online retailers over those on the high street. For example, the typical high street store in London will be subject to as much as a 14% rise, whereas out-of-town distribution warehouses utilised by many online retailers face only a 2% rise.
The government has provided some respite in announcing that rates for those losing their rate relief will be limited to an increase of no more than £50 per month, which may ease the transition and in turn help businesses to manage their costs better.
In a positive move for pubs, those with a rateable value of less than £100,000 will receive £1000 discount on the rates they pay.
Additionally, the chancellor announced a fund worth £300m for struggling businesses. Acknowledging that central government isn’t always best placed to make the most suitable decisions over who should receive funding, this will be administered to local councils, which will be able to grant it to the businesses most in need on a discretionary basis.
Tax & NI
Initially, the self-employed were to be the hardest hit when it came to tax and national insurance. The headline was that Class 4 National Insurance Contributions (NIC) would increase from 9% to 10% in April 2018, with a further increase to 11% scheduled for the following year. An estimated additional £145m revenue would be raised as a result and bring the rate close to the 12% paid by employed PAYE workers.
However, in a dramatic U-turn on 15th March, the chancellor has announced that this planned rise will no longer go ahead, much to the relief of millions of self-employed workers.
While this is welcome news, the tax-free dividend threshold related to the self-employed will still be drastically reduced from £5000 to £2000, taking effect in April next year. This will have an effect on small business owners who rely on dividends as a source of income.
Under the new digital tax system, those who are subject to self-employed tax returns were going to need to file these quarterly, as opposed to annually as it currently stands. The chancellor announced that this move was to be delayed by a year.
Both alcohol and fuel duty were frozen, largely to the benefit of pubs and other small businesses. The average van driver, it’s said, would save up to £350 a year, while car drivers will save £130.
The Research & Development tax scheme is designated for businesses who invest innovation and research. It offers tax breaks of up to 33p per £1 spent in this area. However, the government admitted that the process is somewhat arduous and would be taking steps to simplify it going forward, giving more businesses the opportunity to claim money back.
In terms of the economy, the chancellor announced that GDP is down to 1.6%, but should reach 2% by 2020. On the other side of things, the economic growth forecast is up 0.6% from 1.4% to 2%, which is generally positive for business in Britain.
If you do find yourself negatively impacted by any of the changes, it’s worth looking at your costs in other areas. At Make It Cheaper, we specialise in business services – energy, insurance and telecoms. More often than not, we see business customers unnecessarily overspending in these areas and we’re here to help. Visit our homepage to see if we could save you time and money.