Consider yourself, in chancellor Phillip Hammond’s words, a striver or a grafter? Then, the autumn 2018 Budget was aimed at people like you. With a number of specific concessions and incentives targeted at small business owners, the budget offers a fair few benefits to entrepreneurs (as well as a couple of changes you need to be aware of).
Since it was delivered on 29th October, we’ve spent the last couple of weeks scouring the text of the budget to work out how it helps our small business clients. Here is our summary of what it means for you.
A budget for uncertain times
The autumn 2018 budget was not especially ground-breaking. The consensus is that this is a pre-Brexit budget which does not make major changes to the UK economy – until we have more clarity over what shape Brexit will ultimately take, any bigger plans the chancellor has will have to be put on hold. Nonetheless, small business owners can take heart from a number of tweaks which will positively affect them.
Personal tax allowance rises
The chancellor announced an increase in the personal tax allowance – the amount you’re allowed to take home without paying any tax. As of next year, this amount will rise to £12,500 from £11,850 in 2018/19. That will mean for the first £12,500 you earn, you won’t have to pay any tax at all – after which you will pay tax on the rest of your earnings (for more information on how this works, download our eBooklet).
Rising tax bands
The income tax bands for 2019/2020 will change as follows:
- The basic rate will increase to £37,500 from £34,500
- The higher rate band is now £37,501 to £150,000
- The additional rate has not changed for income over £150,000
Shoring up the high street
Bricks and mortar businesses have taken a real battering in recent years from online competition combined with high business rates. If you run an independent pub, corner shop, restaurant or retail business, Mr Hammond announced some long-awaited respite. Businesses with a rateable value of £51,000 and under will see their rates bill cut by a third, meaning more money in your pocket.
What’s more, the budget also revealed a new Future High Streets Fund of £675m of funding for local councils to reinvigorate ailing high streets. This money will aim to provide councils with cash to invest in high streets to adapt to an era where more shopping happens online.
Big increase to the annual investment allowance
At present, businesses can claim back up to £200,000 worth of investments off their tax bill. However, next year this will temporarily be increased to £1 million. So, if you’ve been thinking of buying new machinery, technology or anything else to boost your business, you’d be smart to spend it during this giveaway. It should be noted that not all capital expenditure will apply for this relief – talk to tax and accounting experts before you make a big purchase.
Greater Manchester small business fund
Run a business in the Greater Manchester area? Then you’ll be able to apply for a new fund that provides skills training to help you improve and enhance your offering.
VAT threshold remains the same
A final piece of good news is that the VAT threshold, currently set at £85,000 will remain as it is until at least 2022. The UK’s VAT threshold is one of the highest in the world as it is, and means many small businesses needn’t worry about charging extra for their services.
Autumn 2018 budget – changes small businesses should look out for
The autumn 2018 budget for small businesses is mainly small business-friendly, but there are a couple of changes coming down the line you should watch out for.
IR35 to be extended to the private sector
IR35 is a piece of regulation aimed at stopping contractors who are effectively working as full time employees from gaining the tax breaks given to the self-employed (read our IR35 explainer blog here). Until now, IR35 has mainly targeted contractors working in the public sector, yet the 2018 budget made it clear that there will be a clampdown on this behaviour in the private sector too. If you’re a contractor, now’s the time to review your tax affairs to ensure you don’t get caught out.
Lack of clarity about new digital services tax
A headline-grabber from the budget was a new digital services tax which is aimed at cutting tax avoidance by large international tax firms – it will amount to a 2% tax on all revenues of digital services. While the chancellor said it was aimed at large, established tech firms, there remains a lack of clarity over how it will affect start-ups in the long term, as well as small businesses selling through Amazon or eBay. Watch this space.
It all depends on Brexit
As noted, this year’s budget was hardly ground-breaking due to uncertainty about what exactly is going to happen with Brexit. That said, there were still a few perks for small businesses which make it a positive budget overall.
Want to take advantage of any of the giveaways in the budget? Contact DSL today to find out how it will apply to your business.