Rising to address Parliament, the Chancellor of the Exchequer, Philip Hammond, recognised that the Government couldn’t “build an economy fit for the future without supporting its backbone” – the country’s small to medium-sized enterprises (SMEs).
Mr Hammond proclaimed that he recognised the pressure small businesses were under but, arguably, this was not truly reflected in the Budget he went on to deliver.
One of the key measures in his speech was the confirmation that the National Living Wage (NLW) and National Minimum Wage would continue to rise, with the NLW reaching £7.83 an hour from April next year.
This will increase payroll costs significantly for firms, forcing them to pay additional National Insurance Contributions and increasing payments into their workplace pension schemes.
In a small giveaway to SMEs, Mr Hammond announced changes to business rates that will see the date at which rates switch from being set by the Retail Price Index (RPI) to Consumer Price Index (CPI) brought forward to April 2018 – two years ahead of schedule. This is expected to reduce the burden of business rates by £2.3 billion over next five years.
The Chancellor also confirmed that the Government would invest £2.3 billion in research and development, setting aside additional money, worth up to £500 million, for the development of AI and broadband. R&D Research and Development Expenditure Credit would increase from 11 per cent to 12 per cent on qualifying expenditure, to help firms invest more.
Small businesses across the UK will also welcome the freezing of the VAT threshold. Prior to the Budget, the Office for Tax Simplification released a report suggesting that the Government should reduce the threshold to bring more businesses within the VAT regime – as the UK has one of the world’s highest limits.
However, the Chancellor said he may look to reform the threshold in future, but not within the next two years.
Although there are a few positive aspects to the latest Budget, many commentators suggest that the proposals as a whole fail to address some of the key issues that companies are currently facing.
On a personal level, the Chancellor also confirmed that the personal income tax allowance would continue to rise to £11,850 in April 2018, while the higher rate threshold will rise to £46,350, which is in line with the Government’s current commitments.
At Moore Thompson, our experienced team of accountants and tax advisers are here to help you and your clients make sense of the latest Budget and provide practical assistance to ensure that the both your business and personal finances are tax efficient. Please get in touch with us and we will be happy to help.