Met with a mixture of criticism and praise, yesterday saw Philip Hammond, Chancellor of the Exchequer, deliver 2017’s Autumn Budget.
Although discussion of business related issues was relatively sparse in the Budget, there were a number of announcements that will inevitably affect the business community from next year.
Here we take an in-depth look into the Autumn Budget and how it will ultimately affect businesses across the UK.
VAT Registration Threshold
From April 2018 the VAT registration threshold for tax has been frozen for a minimum of two years at £85,000; however, the Chancellor also stated that a consultation on whether the ‘threshold design could incentivise growth’ will take place over the two years in which the threshold has been frozen. For small businesses this is a positive step in light of the imminent introduction of Making Tax Digital in April 2019, as any changes to the threshold at this time would only add further complication as the scheme is implemented.
Personal Income Tax
The personal tax allowance will increase once again from April, rising from the current allowance of £11,500 to £11,850. The threshold for higher rate tax payers will rise to £46,350.
National Living Wage
Living wage increases mean that those aged 25 and over will be entitled to a pay of £7.83 per hour from April, therefore employers currently aligning their pay rates to the living wage must adequately prepare themselves to make this change from next year.
25+ – £7.83 (currently £7.50)
21-24 – £7.38 (currently £7.05)
18-20 – £5.90 (currently £5.60)
16-17 – £4.20 (currently £4.05)
Apprentices – £3.70 (currently £3.50)
It was predicted that IR35 for the private sector would be a major topic of discussion within the Budget, however, no concrete changes have been announced; the government will carry out a consultation on the topic and a report will be published in 2018.
Tax Avoidance and Evasion
The government has announced a number of steps that will be taken in the forthcoming year to tackle tax avoidance and evasion by employers, which is predicted to raise up to £15 million per year.
UK growth forecast has been cut from 2% to 1.5%, and in preparation for Brexit £3 billion has been set aside.
Investment in Businesses
There will be an investment of £2.3 billion for research and development, as well as a funding boost of £13 billion to help UK SMEs.
Making Tax Digital
Announced in July, Making Tax Digital was put into legislation within the Finance Act 2017. The scheme will begin in April 2019, only for those with turnover above the VAT threshold. Only once the scheme is deemed to be working will it be widened.
Corporation tax will remain unchanged at 19%, although Indexation Allowance will be frozen from 1st January 2018 to ensure that the corporate tax system reflects personal tax with regards to capital gains.
The government will delay implementing changes to NIC policies by one year. Previous plans to increase the rate of Class 4 NICs will no longer proceed.
Due to the fact that the Budget held significantly less focus for the business community, it is hard to pinpoint exactly how businesses will be affected by the forthcoming changes. We predict that the coming months will reveal the full extent, but above all we highly recommend that businesses prepare themselves for the national living wage changes at the earliest moment, to ensure that the impact upon their cash flow is kept to a minimum.
Are you unsure of how the upcoming changes could affect your business? Contact our expert team today and see how we can help.