Spring Budget: Steady approach will please business
Despite some positive economic data in the run up to today’s Budget, the Chancellor has reinforced his steady approach while making some small but significant pro-business adjustments.
Here follows a summary of the key points and feedback identified by Menzies as to the budget’s short and long term implications for UK SMEs and individuals.
Spring Budget 2017 Headlines
The Chancellor has announced a £600 a year cap on business rates for smaller retailers that stand to lose the small business rate relief. Local authorities are also being given a £300 million pot to support local business.
The Chancellor has acknowledged that the business rate systems needs fundamental reform and has promised to address this in time. However, in the short term, this cap is not enough and will only deliver limited savings for SME businesses. This will disappoint those expecting big rates increases.
In the interests of ‘fairness’, the Chancellor has opted to increase National Insurance Contribution rates payable by self-employed workers to 11% by April 2019.
Care needs to be taken to ensure that self-employed workers aren’t unduly disadvantaged. For this reason, the consultation announced to take place this summer is welcome. In particular, employers will also need to be reassured that they will still have access to this valuable and flexible employment pool.
The Chancellor has announced plans for the tax-free dividends allowance to reduce from £5,000 to £2,000 in April 2018.
Before 2016, basic rate tax payers paid no tax at all on dividend payments. Since then, a tax liability has been introduced in stages; first with an exemption on the first £5,000. Now this exemption has been reduced to £2,000, which suggests it could even be removed altogether in time.
This is a stealth tax on basic rate tax payers. It will also hit employees of companies that encourage wider share ownership and make it harder for employers to create meaningful incentives.
The Chancellor stopped short of doing anything further on Corporation Tax, which is planned to decrease to 17% by 2020.
Corporation tax was mentioned several times in the Chancellor’s Statement and this is probably because the government is considering using it as part of Brexit negotiations. Further measures to reduce the administrative burden of R&D tax relief could also be used in this way.
Apprenticeships and technology training
The Chancellor is intending to go ahead with the introduction of the Apprenticeship Levy in April 2018 in its current form. He also announced the introduction of T-Levels; new, skills-focused qualifications to be attained through the further education system.
The introduction of T-Levels is good news but it will be some time before any benefit is felt by employers. It means that 13,000 qualifications will be replaced by just 15 and this will certainly bring greater focus, which will help employers to understand and recognise these new qualifications.
Spring Budget 2017: Business Sector Implications
Here follows a summary of the headline points following the Chancellor’s 2017 Spring Budget for each of Menzies’ core business sectors.
Business Services sector
Hospitality & leisure sector
Property and Construction Sector
Retail & wholesale sector
Transport & logistics sector
For more information about Menzies LLP or to talk to us about the impact of the 2017 Spring Budget on your business and personal finances, contact your Menzies Relationship Partner directly or complete our online contact form.