Budget 2018: Hammond's hope over horrors

The future is bright! Or at least it's getting there according to Fiscal Phil, who gave his third budget speech yesterday.  With only one mention of Brexit by name, though plenty of allusions to it, the steady budget had few shocks but plenty of cash released - an end to austerity is coming, 'but discipline remains', here's hoping the Office of Budget Responsibility (OBR) has been disciplined in their reviews!

The focus on business in this budget does seem to take account of smaller businesses for once too, although as ever with Philip Hammond the devil's in the detail and the detail is relegated to the big Red Book - if it's there at all and not just another consultation!

Annual Investment Allowance

This will be increased to £1million for two years from 1st January 2019.  This allowance (currently £200,000 lets you reduce your tax bill by taking in to account the cost of qualifying investments in plant & machinery. 

R&D tax credits

Previous restrictions on the total claim of R&D tax credits will be reinstated from April 2020 for loss-making companies.  From April 2020, the claim will be restricted to three times the company's total PAYE & NIC liability for the year.  There will be qualifying conditions and is in place to target identified abuse of the scheme.

Employment Allowance (EA)

From April 2020, only employers with total National Insurance contributions below £100,000 in their previous tax year will be able to make an EA claim.  The EA allows qualifying businesses to reduce their employer NIC bill by up to £3,000.

Entrepreneurs Relief

The minimum qualifying period to meet the rest of the conditions will increase to 24 months from 6th April 2019 from its current 12 months, contributing to the aim of supporting longer term business investments.

Apprenticeships

With various changes to the levy and Apprenticeship scheme in general, the highlight here is the government is halving the investment rate for employers from 10% to 5% for apprenticeship training.  
The National Retraining Scheme is still around as well.

Environment / Plastics

More funding for plastics R&D and approaches to recycling.  The Chancellor once again highlighted plastic packaging, single use plastic and disposable cups.  Now this is on everyone's watchlist he's giving companies time to reform, but will be introducing a tax on the production and import of plastic packaging in 2022.  There will be a consultation, but any plastic packaging doesn't contain 30% of recycled plastic or more will be liable for this tax.
This is absolutely an area to review and improve.

Housing / Builders

Consultations on extending planning rights above commercial premises and looking at redeveloping  underused retail/commercial centres in to housing.  Positive changes tax relief for new non-residential structures and buildings seems to put this at odds - but both measures are to encourage businesses and the high street.  Schemes to support SME housebuilder lending were announced too.

VAT 

HMRC are continuing to look at ways to reform the VAT threshold, to make a smoother transition for small businesses rather than the current cliff-edge of registration. With heavy hints things will be different post-Brexit, no change will be made to the current VAT threshold of £85,000 until April 2022.  

Business rates

A one-third cut to business rates for retail properties with a rateable value below £51,000 for 2 years, from April 2019.

IR35

For anyone who uses contractors and is a 'small business' (yet to be defined) - confirmation that IR35 changes won't apply is a happy relief.  As qualifying criteria are announced we'll give more information on who these changes will apply to.

 

Other Announcements

Personal   

  • Increase to the personal allowance from £11,850 (April 2018) to £12,500 in April 2019). 
  • Higher rate threshold increasing from £46,350 (April 2018) to £50,000 in April 2019, a year earlier than originally planned. 
  • These thresholds will remain at the same level for 2020-21.
  • Scottish tax payers have different tax rates and thresholds. The Scottish government will provide its draft budget for Scottish tax payers on 12th December 2019. 
  • ISA annual subscription limit for 2019-20 remains at £20,000.
  • National Living Wage (NLW) will increase in April 2019 from £7.83 to £8.21 for those aged 25 and over, with the NMW rising above inflation too.
  • Fuel, beer, cider and spirits duty remain frozen.
  • Lettings relief will be limited to properties where the owner has a shared occupancy with the tenant. 
  • Universal Credits will remain but money released to help implementation, Universal Credit Work Allowances increased by £1,000 per year. 

Business Tax

  • Corporation Tax will still be cut to 17% in 2020.  It's currently 19%, the lowest rate in the G20.
  • New 2% digital services tax for big technology companies.
  • Private finance initiative (PFI) contracts won't be used in the future.  Current contracts won't be cancelled, but a line has been drawn.

The Economy

The growth forecast has been downgraded from 1.5% to 1.3%.

  • However, growth forecast for 2019 has been raised from 1.3% to 1.6%, with annual forecasts raised for the next 4 years.
  • 3.3 million more people are in work since 2010, with 800,000 more jobs forecast by 2022.
  • Wage growth has been at its highest in nearly a decade.
  • An additional £500m given to government departments as part of preparation for exiting the EU, bringing the total government investment in EU exit preparations to over £4bn since 2016

Whilst it may not be a Halloween 'Hammo House of Horrors', given the upheaval and unknowns we're facing it's almost a budget that hopes to merrily ignore this and carry on regardless.  The Chancellor is clearly trying to give the economy a kick with plenty of incentives for growth and new programmes, reinforcing that everything will be well, but he's still reserved the Spring Statement as a potential budget - an upgrade which will almost certainly happen.   

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