Here, Business Advice provides an Autumn Budget 2017 summary of the key announcements made by Philip Hammond, during his inaugural Autumn Budget speech on 22 November.
For small business owners, there was a lot to digest from the chancellor’s Budget speech. Unsurprisingly, the announcements have divided people’s opinions.
To bring owners up to speed on what the key policies may mean for their firm, here’s our 500-word Autumn Budget 2017 summary.
VAT threshold remains unchanged, for now
Philip Hammond has decided not to lower the threshold at which individuals begin paying VAT on their income. He’s left it where it is at £85,000 a year (for the next two years, at least) amid heavy criticism from small business organisations.
Bodies such as the FSB have welcomed the news, having campaigned against VAT reform on the grounds that it would massively drain smaller firms’ resources. However, commentators have warned that Hammond’s VAT threshold freeze may only be a temporary concession, with the government planning a larger overhaul of VAT in 2020.
The chancellor brought forward plans to change the way business rates increases in the UK are measured by two years. From April 2018, the Consumer Price Index (CPI), will replace the Retail Price Index (RPI) as the inflation measure used to calculate business rates. It is thought the move will save companies £2.3bn over three years.
Elsewhere, the unpopular staircase tax was abolished. Hammond promised that any owner impacted by the staircase tax since its introduction would have their original rates bills reinstated. The chancellor also announced that after the next business rates revaluation in 2022, revaluations will take place every three years as opposed to five years.
Tax-free personal allowance extended
The chancellor confirmed an increase of the personal allowance, from £11,500 to £11,850, providing a tax-free boost of £350 a year to those on lower incomes. For the average taxpayer, Hammond claimed the move will result in a £1,075 overall tax reduction in 2018/19.
R&D tax relief measures boosted
Further tax relief measures were announced for qualifying small firms that carry out research and development (R&D), and claim the RDEC standalone tax credit. The current RDEC rate is set at 11 per cent of a firm’s qualifying R&D expenditure, but the Budget speech increased the rate to 12 per cent.
National Productivity Investment Fund extended
Hammond extended the National Productivity Investment Fund to be worth more than £31bn. Some £20bn of the fund will be allocated to key productivity-boosting business investments, including housing and infrastructure projects. An extra £2.3bn of the fund will be saved for R&D projects, and £500m will go towards innovation initiatives in AI, 5G and broadband connectivity.
British Business Bank given a further boost
The chancellor gave a £2.5bn funding boost to the BBB as part of a wider £20bn Patient Capital investment to help fast-growing companies scale up. The funding is intended to encourage greater long-term investment in riskier scale up businesses, and is the largest government commitment yet to the BBB.
National Living Wage increase set for 2018
In April 2018, the National Living Wage (NLW) – the hourly rate paid to workers aged over 25 in the UK – will be increased to £7.83, Hammond confirmed in his speech. Currently set at £7.50 an hour, the chancellor claimed the planned increase will see the income of workers on low pay increase by £600 a year.
Missed the speech? Read the full transcript of Philip Hammond’s Autumn Budget speech here.
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