In his Autumn Budget 2017, Hammond said that he wants to increase the rate at which new businesses are launching in the UK to one every half an hour. He also wants to ease the pressures facing small business owners, giving them the resilience to thrive. It’s not surprising then that this was probably one of the most business-friendly budgets we have seen for some time.
Research conducted by the Centre for Economics and Business Research (CEBR) verifies this, by revealing that SME businesses contributed over £196bn to the UK’s total GDP in 2016 and provided over half of all private sector jobs.
Perhaps it wasn?t particularly creative, but there were a range of sound measures unveiled to support small business owners and at the same time, address the issue of corporate tax avoidance by ensuring that large international organisations, with the resources to use tax havens and limit the amount of UK corporation tax they pay, will soon be required to pay their tax dues locally too.
Here are ten Budget 2017 announcements that will have a positive impact on small business owners:
(1) Increased support for research and innovation
R&D tax credits is already a very valuable tax relief and the rate has been extended to 12 per cent, resulting in 2.4 per cent of GDP being allocated to funding investments in R&D by UK companies. However, scratch beneath the surface and you will discover that this rate is only applicable to larger companies, bringing them closer into line with the Enhanced R&D tax relief rate already available for small businesses as announced in the previous Budget.
However, there were other innovation?-related Budget 2017 giveaways that will benefit small businesses. These include a further £2.3bn announced for investment in R&D and a fund of over £500m to invest in a range of initiatives from AI to 5G and full fibre broadband. In addition, there is to be a new Regulators’ Pioneer Fund, as well as a new Geospatial Data Commission to develop a strategy for using the government’s location data, to support economic growth.
(2) Support for a cleaner environment
Air quality in many of the UK’s cities is very poor and a £220m clean air” fund was announced. There will also be a range of initiatives to promote investment in electric cars, with £400m pledged for a new charging infrastructure and £40m invested into improving charging technology. The current law will be clarified so that people who charge their electric vehicles at work will not face a benefit-in-kind charge from next year.
Diesel car drivers will start to face higher taxes from April 2018. The first year VED rate for diesel cars that do not meet the latest standards will go up by one band. In addition, the existing diesel supplement in company car tax will rise by one per cent.
(3) Support for businesses with global aspirations
Video conferencing is brilliant, but sometimes there’s just no substitute for a face to face meeting. Given that fostering close international relationships is now more important than ever in the wake of Brexit, news that air passenger duty is being frozen for all budget and transatlantic air travel is good for small businesses looking to expand globally and trade overseas. That is, unless they travel in first class or on a private jet!
(4) Support for high-street businesses
Business rates have been a controversial topic for some time and the news that the government will be piloting a 100 per cent business rates retention in London next year was welcomed. In addition, the planned switch from basing the cost of rates against the RPI (retail price index) to the CPI (consumer price index), will be brought forward by two years to April 2018, after concerns about potential costs of the annual uprating business rates in April.
This is expected to provide business rates relief to the value of £2.3bn or more over the next five years. There is also an extension to the existing support available for small pubs and restaurants. This extends the current £1,000 discount for pubs with a ratable value of less than £100,000 for another year, to March 2019.
(5) No reduction to the VAT threshold
There were numerous rumours leading up to the Budget 2017 that the VAT registration threshold would be cut by as much as 50 per cent. Effective for businesses with a turnover of ?85,000 or more, UK’s VAT threshold is currently the highest in the OECD Germany’s is just £15,600, for example. Economists argue the high VAT threshold distorts competition, plus dis-incentivises business growth and they have been making cases for it to be reduced.
However, the threshold being set at a relatively high level also means that the majority of the UK’s smallest SMEs do not have to charge VAT, which helps them obtain and retain business. Taking these factors into consideration, Philip Hammond announced he would not cut the threshold as rumoured and whilst a consultation process will be started, the threshold will be maintained at ?85,000 for the next two years.
Continue onto the next page for the five remaining reasonsAutumn Budget 2017 is good news.