The chancellor Phillip Hammond presented a relatively low-key Budget that was cautiously welcomed by small businesses.
Brexit cast a long shadow over proceedings. This was a Budget designed to give the chancellor some room to manoeuvre in the unpredictable post-Brexit landscape. It also benefitted the upgraded forecasts for Government growth and higher than expected tax revenues.
Small business highlights
Against the background of speculation of a reduction in the VAT threshold, small businesses will benefit from the chancellor’s decision to freeze the £85,000 turnover threshold for VAT registration until 2022. According to the Federation of Small Businesses, complying with the VAT regime costs the average small business a working week every year.
The Budget also included a significant temporary increase to the annual investment allowance to boost investment in capital expenditure. The chancellor confirmed the planned drop in the rate of corporation tax to 17% from 1 April 2020, reiterating the pledge to keep the UK at the lowest rate of corporation tax in the G20. There were also measures designed to stem the reduction of firms offering apprentices; small firms will now only have to pay 5% of apprenticeship training costs rather than the current 10%.
However, concerns have been raised by small businesses over reforms to the off-payroll working rules, otherwise known as IR35. This is regarded as the biggest tax grab of the Budget and is an extension of the off-payroll rules that are currently in use in the public sector. These changes will move the onus to determine whether any contractors used are genuine freelancers for an organisation, agency or third party who has engaged them. If they are considered employees, the engaging company is liable for deducting the correct tax. Smaller organisations will be exempt, although all organisations would benefit from professional advice on this issue.
Brexit briefing: The British Chambers of Commerce have produced a briefing to help businesses understand potential changes under different Brexit scenarios. The document is available on the British Chambers of Commerce website alongside a number of other resources in the ‘Preparing for Brexit’ section. The briefing measures the level of clarity for business that the proposed Brexit agreements provide against its Risk Register and Business Preparedness Checklist. For more information, go to www.britishchambers.org.uk.
The Autumn Budget other Highlights:
The main rate of corporation tax remains at 19% for 2019/20 but will be cut to 17% in 2020/21.
Annual investment allowance
The annual investment allowance will be temporarily increased from £200,000 to £1m for a two-year period from 1 January 2019.
Structures and building allowance
New structures and the renovation of nonresidential structures and buildings will be eligible for a 2% capital allowance.
From April 2020 the employment allowance will be restricted to only those employers who had a NICs bill below £100,000 in the previous tax year.
Corporate capital loss restriction
From 1 April 2020, the Government will restrict the proportion of annual capital gains that can be relieved by brought forward capital losses to 50%.
Business rates on the high street
Business rates will be reduced by one-third for retail properties with a rateable value below £51,000 for two years from April 2019, subject to state aid limits.
Personal allowance increase
The tax-free personal allowance will increase from £11,850 to £12,500, and will be gradually withdrawn for those with adjusted net income of between £100,000 and £125,000.
Higher rate tax band increase
The higher-rate tax threshold will increase from £46,350 to £50,000. This limit will remain in place for the 2020/21 tax year.
Company car benefit
The car fuel benefit multiplier will increase from £23,400 to £24,100 from 6 April 2019.
Lifetime allowance for pensions
The lifetime allowance for pension savings increases for 2019/20 from £1.03m to £1.055m.
Capital gains tax annual allowance
The capital gains tax (CGT) annual exempt amount for individuals rises from £11,700 to £12,000 from 6 April 2019. Entrepreneurs’ relief Two new tests for the definition of a ‘personal company’ in relation to the qualifying criteria for entrepreneurs’ relief will be available.
The residence nil-rate band increases from £125,000 to £150,000 from 6 April 2019 and to £175,000 from 6 April 2020.