What the Autumn 2018 Budget means for small businesses

Business news and opinion

1 November 2018

With Philip Hammond having announced the pre-Brexit Autumn 2018 Budget on 29 October, small business owners and landlords up and down the length of country are likely to be taking stock of how the proposed changes will affect the delicate balance of their incomes and outgoings.

Aimed at “hard working families, the strivers, the grafters and the carers who are the backbone of Britain’s communities and economy”, Hammond stated that the Budget marks the beginning of the end of Britain’s age of austerity, signalling an new chapter in the country’s economic narrative.

But what big hitting changes were contained within the small red budget box? And what exactly do Hammond’s optimistic predictions mean for the future of Britain’s small businesses?

Spanning hiring cost increases to tax releases designed to improve the health of the UK’s ailing high streets, we examine what the Autumn 2018 Budget means for small businesses nationwide.

Small business rates will be reduced

The Chancellor announced that small businesses in England with a rateable value of up to £51,000 will see their business rates bill slashed by a third over a two-year period. According to the Budget announcement, this could result in considerable savings of up to £8000, providing a welcome relief for the smallest of small businesses. This reduction is in conjunction with the previous reduction to business rates in 2016, which is projected to save businesses over £12 billion in the next five years.

Personal tax allowance will increase

Personal tax allowance is the amount of money you’re allowed to take home each year before paying tax. Announced a year earlier than predicted, the personal tax allowance for basic rate tax payers will rise from £11,850 to £12,500, which will be worth £130 a year to 26 million people in the 20% income tax band.

For those within the higher rate tax band of 40%, the personal tax allowance rises from £46,350 to £50,000, creating an £850 gain for those within this bracket.

The National Living Wage is going up

If you’re a small business owner with employees, the increase in the National Living Wage, and subsequent increase in staffing costs, is something you’ll need to factor into next year’s balance books.

For those over 25, the National Living Wage will increase from £7.83 per to £8.21 in April, representing a 4.9% rise (or £690 annually), which will benefit around 2.4 million UK workers.

Not only this, auto-enrolment employer pension contributions will also rise to 3% while employee contributions will increase to 5%, so there may be pressure from staff for further pay rises despite this net pay boost and increases in the basic rate personal tax allowance.

The UK’s ailing high streets will get a helping hand

The Chancellor has set out a strategy to help Britain’s hard-hit high streets, which have been struggling under the increasing pressures of high businesses rates and popularity of online shopping.

The reduction of small business rates by a third over a two-year period (as mentioned above) could lead to annual savings of up to £8000 for up to 90% of all independent shops, cafes, restaurant and pubs, according to Hammond.

Alongside this, a £675 million ‘future high streets fund’ will also be introduced in April 2019 to help breathe new life into the high streets. The Chancellor argued that this fund will help local councils transform their high streets by equipping them with the support to invest in their under-used retail and commercial spaces to create new residential opportunities as well as to encourage higher levels of footfall to high street businesses.

There’s a new tax to tackle plastic pollution

With some of the world’s largest corporations pledging to eradicate all plastic waste in a bid to tackle pollution, the Government has welcomed a similarly green-minded tactic by introducing a tax on the manufacture and import of goods that contain less than 30% recycled materials.

A plastic cup and packaging tax is also being considered but the progress of large corporations will be monitored closely before any further decisions are made – meaning it could be worth introducing some greener procedures to your business operation in future if your business relies heavily on the use of plastic materials.

Self-employed contractors

In April 2017 the government introduced IR35 tax legislation to combat tax avoidance by contractors and freelancers who supply their service to clients via an intermediary service, such as their limited company, but who would be an employee if the chosen intermediary was not used. This resulted in some contractors and companies paying significantly less income tax and national insurance contributions.

The arrival of IR35 meant that public-sector employees were legally responsible for calculating whether or not national insurance contributions and income tax applied to their self-employed contractors.

Many anticipated this legislation to extend to the private sector but in a turn of good news for small businesses, the Chancellor confirmed that small businesses will be exempt from the rule change, while medium and large businesses will have to be fully compliant by April 2020.  

Apprenticeship fees have halved

Looking for some fresh talent to bring new ideas to your small business? Then you could be in luck as the Chancellor announced that small business employers will pay half of what they’re currently paying for apprenticeship training fees as they drop to 5% – making the prospect of welcoming a newcomer into the fold of your business that bit more appealing.

The fuel duty freeze remains  

The Government will freeze fuel duty for the ninth year in a row in 2019, saving the average driver £1000 since 2010. This saving is especially welcome news for small business owners who rely heavily on van and car use to carry out everyday tasks – especially as juggling the expenses of vehicle maintenance and keeping running costs low can be tricky enough.

As the country edges ever-closer to Brexit, small businesses up and down the country face an uncertain time. However, some of the changes introduced in the Autumn 2018 Budget, such as the freeze on fuel duty, the slash in business rates for companies with a rateable value under £51,000 and the introduction of the 'future high street fund' could potentially go a long way in helping small businesses grow and develop so that they can turn their ideas into realities and take their business to the next level.

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