At the start of the 2018 Budget, chancellor Philip Hammond promised that the end of austerity was in sight, with further pledges to invest in Britain’s entrepreneurs in order to drive the economy forward.
We’ve rounded up every policy announcement and financial pledge from Hammond’s 2018 Budget that small and micro business owners need to be aware of.
Digital Services Tax
Following calls to level the tax playing field between small retailers and online companies, Hammond announced a new tax for digital firms with over £500m turnover.
Yomdel CEO, Andy Soloman, welcomed the arrival of the digital services tax.
“This budget levels the playing field between the tech giants and the little guy, and I for one raise a glass to Mr Hammond for listening to the UK’s small businesses and delivering this big boost when they needed it most.
“It will no doubt come as a kick below the belt for Bezos and Zuckerberg who have had it too good for too long at the expense of the smaller British retailer, who have been relying on seasonal boosts in sales just to keep their heads above water.”
“Technology plays such a huge part in our day-to-day lives, but it’s important that as it becomes more prevalent we don’t allow it to do so at the expense of British business.”
Business rates reform
Hammond announced a £1.5bn cash boost into the UK business rates system, with small high street retailers the focus of relief to combat the threats posed by ecommerce and shifting shopping habits.
The Treasury claimed almost half a million high street businesses would see business rates cut by a third, through £900m of immediate business rates relief.
Rateable values are also set to change. For the next two years, all businesses on the high streets with a £51,000 rateable value or less will see business rates bills cut by a third. According to the Treasury, changes would see a Sheffield pub with a rateable value of £37,750 save £6,178 next year, while a Midlands newsagent with a rateable value of £14,250 would save £1,749.
Expressing relief at the pledge, Mike Cherry, chairman of the Federation of Small Businesses (FSB), said: “For far too long (retailers) have come up against an outdated and unfair rates system and it’s clear that change is needed.”
Chancellor announces support for the British High Street, including a £675m Future High Streets Fund 🛍️ and a new mandatory business rates relief for public lavatories 🚽 #Budget2018 pic.twitter.com/xnmgTQbiDK
— HM Treasury (@hmtreasury) October 29, 2018
IR35
Following a drawn-out consultation period, the chancellor confirmed IR35 – the so-called “tax grab” on freelancers – would be introduced to the private sector. However, Hammond hinted that the rollout would “exempt small business”. How small is small?
Dave Chaplin, CEO and founder of contracting authority ContractorCalculator, has been a long time critic of IR35. He said: “The chancellor appears to have believed the misleading rhetoric emanating from the Treasury and HMRC on this matter and it is still incredibly worrying that, in the face of strong opposition to the Off-Payroll rules, and with the consultation process yet to be concluded, the chancellor has made this announcement.
“While the fiscal impact of the reform for the taxman is still unknown, one certainty is that a private sector rollout will prove incredibly costly for UK firms and for a government that claims to be pro-business, this extra tax will slap an additional 10% onto the cost of hiring flexible workers for growing businesses that are unable to afford full-time workers. “
VAT
Hammond pledged to maintain the existing VAT threshold until at least 2020.
High street investment
As part of the £1.5bn investment into UK high streets, local high streets will benefit from £675m cash to improve transport links, re-develop unused shops as homes and offices and re-use historic properties.
New Enterprise Allowance and tax-free training
Despite fears that the New Enterprise Allowance (NEA) would be axed altogether, the chancellor pledged to extend the scheme for would-be entrepreneurs currently on state benefits.
Following FSB’s #ThinkSelfEmployed campaign, our Chairman @MikeCherryFSB welcomes the Chancellor’s announcement to extend the New Enterprise Allowance and to provide training support for the self-employed: https://t.co/1GUDGUZ404 pic.twitter.com/jcGRUZgHOx
— FSB (@fsb_policy) October 29, 2018
He also announced tax-deductable training opportunities for the self-employed.
Tax-free personal allowance
Hammond also announced that the tax-free personal allowance would be raised to £12,500 a year earlier than planned.
Chas Roy-Chowdhury, head of taxation at the ACCA (Association of Chartered Certified Accountants), welcomed the move.
“The accelerated personal allowance increase to £12,500 as well as the extension of the basic rate band to £50,000 being brought forward earlier to the next tax year is welcome. Many hard-pressed individuals, who have had little or no pay rises over the last several years (will benefit).”
“This is the biggest signal the chancellor could give that austerity is almost over.”
…and the roads
Potholes and Fuel Duty were also addressed. The government has set aside £420m to fix roads and potholes across Britain.
The FSB’s Jennifer Thomas claimed that small business owners using Britain’s roads regularly would benefit from the investment.
Elsewhere, Fuel Duty was frozen for a ninth year in a row.
But is this a “phoney” Budget?
However, not all of the business community was convinced by Hammond’s Budget. With Brexit looming and economic uncertainty felt widely, Mike Taylor, managing director of Accelerating Experience, said a more realistic Budget would soon be delivered.
“The reality is this is a ‘phoney’ Budget. Until the chancellor knows the outcome of Brexit negotiations, any plans he puts in place are subject to considerable change; there’s every chance we will see another Budget in six months’ time.
“UK businesses were certainly on Mr Hammond’s agenda, but they were not at the top by any means. The £200m commitment from the British business bank, the business rate relief for retailers and the additional funding for apprenticeships will provide some support.
“But it is hardly the pro-business Budget that many leaders have hoped for, given the level of uncertainty they are operating in. So it is vital that businesses control what they can, preparing for March 29th by investing time and money in their workforce. This is not a Budget to be relied on.”
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