What Does The Autumn Budget Mean For Small Businesses?

By SME Insurance

Posted 01/12/17

What Does The Autumn Budget Mean For Small Businesses?

Phillip Hammond announced his Autumn Budget on 22 November 2017. This is his second budget since taking over as chancellor and there were some less than positive projections for economic growth, alongside the announcement that the UK has dropped out of the world’s top five wealthiest countries. 

However, it was not all bad, with the Chancellor recognising the need to support the small and medium businesses (SMEs), who represent the backbone of UK economy (99.9% of all public sector businesses), in order to get the UK “back into good shape” [1][2]. This article looks at the key points and summarises the updates and plans that will have most relevance for SME businesses.  

Business Landscape

  • Growth forecast for 2017 reduced to 1.5%, down from two per cent.
  • GDP forecast to reduce to 1.4% in 2018-2019, then 1.3% in 2019-2020, before rising back up to 1.5% in 2020-2021, and 1.6% in 2021-22.
  • Forecasts for productivity and business investment are down.
  • Annual rate of CPI inflation will fall from peak of three per cent to two per cent.
  • 600,000 more people are expected to be in work by 2022.

Business Tax

It looks like the government has learnt from its unpopular decision to increase flat-rate VAT to 16.5% in the previous Autumn Budget, with the Chancellor committing to freeze the rate at which companies must register for VAT at £85,000 until at least 2020. This is way above the EU average of £20,000 and the highest in the world after Singapore [3].   

Business Rates

The Chancellor announced a switch in the inflation measure used to calculate business rates (taxes paid on non-residential properties) from the Retail Price Index (RPI) to the Consumer Price Index (CPI). This will reduce taxes on commercial properties, helping put retailers on the same footing as their online competitors. It is anticipated that this will save businesses £2.3bn over the next five years [4]. 

Business Investment

British Business Bank will replace European Investment Fund lending if and when needed, and the Government has doubled the limit of the Enterprise Investment Scheme (EIS) as part of a £20bn pledge to aid the growth of UK start-ups. The EIS is a tax relief scheme that encourages private investment in SME businesses. This increase will help entrepreneurs scale-up their businesses and enable the UK to continue to build global leaders [5].

Alcohol Duty

Alcohol duty will freeze, apart from on low-cost, high-strength ciders and beers. This is great news for those in the hospitality sector, which had concerns about what an increase in duty could mean for struggling businesses. The chancellor calculated that this will save consumers the equivalent of 12p on each pint of beer, with a projected overall saving of £100m [6].  

Wages

The minimum wage for workers over the age of 25 will be increased by 4.4 % from £7.50 to £7.83 an hour. This means an increase of £600 a year for full time workers; with wages for apprentices also up by 20p [7]. 

Hopefully, in the words of Chancellor Phillip Hammond, these plans can help us all to “look forwards, embrace change, meet our challenges head on and seize the opportunities for Britain” [8].

Sources

[1] http://www.fsb.org.uk/media-centre/small-business-statistics

[2] https://www.enterprisenation.com/blog/posts/enterprise-nation-s-emma-jones-on-autumn-budget-2017-a-solid-budget-to-get-uk-into-good-shape-for-brexit

[3] http://www.thisismoney.co.uk/money/smallbusiness/article-5107743/What-Autumn-Budget-means-small-business.html

[4] http://www.bbc.com/news/business-42085005

[5] http://www.growthbusiness.co.uk/budget-2017-uk-scale-ups-new-fund-eis-limit-2553016/

[6] https://www.thedrinksbusiness.com/2017/11/industry-rejoices-as-chancellor-freezes-wine-and-spirit-duty/

[7] http://www.mirror.co.uk/money/national-living-wage-rising-millions-11565710

[8] http://smallbusiness.co.uk/autumn-budget-2017-small-business-guide-2541658/

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.

Posted 01/12/17

Author: SME Insurance

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