Here in your final issue of 2017, Sussex Business Times gives you a rundown of the budget announcements made by Philip Hammond, the Chancellor of the Exchequer, at this year’s Autumn Statement
On Wednesday 22nd November, the second budget of 2017 – the Autumn Budget – took place as Philip Hammond, the Chancellor of the Exchequer yet again made the latest budget announcements for the UK economy.
Of course, Sussex Business Times covers both budget announcements every year, so let’s jump straight into what statements were made this time around…
One of the main points made in relation to business in the UK was that of the rise in employment over the past year, driven by full time workers, while unemployment is also at its lowest rate since 1975. In 2017 growth has remained solid, but slowed slightly at the start of the year. The UK economy is forecast to grow by 1.5% in 2017. It will then grow at a slightly slower rate in the next three years, before picking up in 2021 and 2022. Also, the National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018, and over 2 million people are expected to benefit. For a full-time worker, it represents a pay rise of over £600 a year. The National Minimum Wage will also increase; £7.38 per hour for 21-24 year olds, £5.90 per hour for 18-20 year olds, £4.20 per hour for 16 and 17 year olds, and £3.70 per hour for apprentices.
Transport is always a hot topic within the Chancellor of Exchqeuer’s yearly budget announcements, and this time around, it’s been said that £1.7 billion will go towards improving transport in English cities. Half will be given to Combined Authorities with Mayors, and the rest allocated by a competition. An extra £337 million will go towards a fleet of new trains on the Tyne & Wear Metro and an extra £6 million will go towards the Midlands Connect motorway and rail projects. In addition to this, transport links along the Cambridge-Milton Keynes-Oxford corridor will be improved by completing the rail link between Oxford and Bedford, and Aylesbury and Milton Keynes, and setting up a new East West Rail Company to speed up work on the rail link between Bedford and Cambridge. £5 million will be spent with an aim to help develop plans for Cambridge South Station building the Expressway road between Oxford and Cambridge – two major location points for the UK’s business world.
Also, in 2018, fuel duty will remain frozen for the eighth year in a row, saving drivers £160 a year on average, and the government have plans to work with the rail industry on a new railcard which will be introduced from spring 2018. The UK will also set out rules so that self-driving cars can be tested without a safety operator, while an extra £100 million will go towards helping people buy battery electric cars. The government will also make sure all new homes are built with the right cables for electric car charge points.
£3.5 billion will be invested in upgrading NHS buildings and improving care – music to the ears of many people in the UK. Meanwhile, £2.8 billion will go towards improving A&E performance, reducing waiting times for patients, and treating more people this winter.
Education-wise, it has been announced that schools will get £600 for every extra pupil who takes A level or Core maths and a reasonable £27 million will help improve how maths is taught in 3,000 schools – a key life skill. £49 million will go towards helping students resitting GCSE maths and £350,000 of extra funding a year will be given to every specialist maths school that is set up across the country. The number of fully-qualified computer science teachers will also rise from 4,000 to 12,000.
£34 million will go towards teaching construction skills like bricklaying and plastering. £30 million will go towards digital courses using AI. This funding is provided in advance of launching a National Retraining Scheme that will help people get new skills. It will be overseen by the government, the Trades Union Congress (TUC) and the Confederation of British Industry (CBI). They will decide on other areas of the economy where new skills and training courses are needed.
So what did businesses have to say about this year’s Autumn Budget?
Jonathan Sherman, Solicitor, Coffin Mew: “This was very much the budget for tech, start-ups, and scale-ups. However, the development of new technologies, such as autonomous cars and AI, is very much at the mercy of our legal and regulatory systems. Already there are issues with how fast these kinds of ideas can advance while there are questions about insurance and liability. While producing an environment for greater investment in future technologies is a start, the law needs to adapt to allow our nation to lead the way. There is talk of making a friendlier regulatory environment but with the fast pace of change, this needs to happen sooner rather than later. Hopefully Philip Hammond and the government recognise this and the ideas in the budget are a start of greater things to come.”
Caroline Wood, Director of the Coastal West Sussex Partnership Board: “While growth forecasts are down across the UK, on first viewing, there are measures which, on paper, will support the economic development of the West Sussex area in the coming years.
“The pledge to embark on the biggest housebuilding scheme since the 1970s will boost all sectors, up-skilling construction workers as well as providing affordable places for thousands of people to live. But this needs to be balanced along the coast with providing space for business so those same people can work.
“We also welcome the pledge to improve the teaching of computer science and maths which will go a long way to providing the skilled workforce for our world-leading STEM industries which are developing so rapidly across our area.”
Mike Taylor, Managing Director at Business Performance and Leadership Consultancy Accelerating Experience: “Injecting more capital into the National Productivity Investment Fund is a positive sign of the government’s commitment to solving Britain’s productivity crisis. Improving business investment is an important ingredient to productivity gains, but we also need to see skills developed in the right part of businesses. Yes we need an improvement in worker skills to boost output, but we also need to address the current paucity of true leadership in many businesses.
Alison Sampson, Senior VAT Adviser at Knill James: “The VAT registration threshold is to remain at the current level of £85,000, and the deregistration threshold at £83,000 for two years from April 2018. This comes as a pleasant surprise for smaller businesses, as there was a possibility of the VAT threshold being significantly reduced.
“The Office of Tax Simplification had previously concluded that the current VAT threshold (the highest within OECD countries) distorts competition and poses a disincentive to business growth, so there was some concern that the UK VAT threshold might be significantly reduced. Beware though, as there is to be a consultation to establish whether there should be any changes to the threshold or the way that the UK implements VAT registration after April 2020.
“This measure may well be specifically aimed at keeping the number of businesses required to file VAT data through the Making Tax Digital regime to a minimum when it is first introduced in April 2019, while the new system is rolled out and teething problems corrected.”
SBT also caught up with Paula Joyce, Tax Manager at Sheen Stickland Chartered Accountants, to get their view on this year’s Autumn Budget…
Small businesses seemed to take a back seat in this budget with minimal changes being announced and so the key point to take away is that for many it will be “business as usual.”
The key emphasis of the budget speech was the “technical revolution” that is upon us and encouraging the UK to embrace changes that will “transform our living standards for generations to come.”
The government announced £500 million of investment into a range of initiatives from artificial intelligence to full fibre broadband and 5G, however there was some comfort in that driverless cars will not be taking over UK roads just yet, much to Jeremy Clarkson’s satisfaction.
Cars remained in focus, with further research and development into how, and where electric vehicles can be charged and the speech provided welcome confirmation that electric cars charged at work will not be a taxable benefit in kind.
It was also announced that from April 2018 diesel cars not meeting the latest standards will be paying more vehicle tax and the benefit in kind diesel supplement will increase from 3% to 4% with the maximum percentage being 37%.
Philip Hammond noted that “white van man (or woman)” will be safe from this increase, however given the inherent complications in confirming whether a vehicle is a car or van it will be interesting to see how this differential is noted in the legislation. Many of us will remember the increased interest in double cab pickups becoming the stable family vehicle!
For corporate bodies the most significant change is the removal of relief on corporate gains for inflation. Corporate indexation allowance will be frozen from 1 January 2018 and accordingly no relief for inflation will be available for companies disposing of capital assets accruing after this date.
There will be some changes to venture capital trusts and enterprise investment schemes, with a heavier focus on investments where the capital is genuinely at risk, rather than being protected. Tax-motivated investments, where the tax relief provides all or most of the return for an investor with limited risk to the original investment, will no longer be eligible.
In addition the “staircase tax” was addressed by legislating retrospectively to counteract the loss of business rate relief as a result of the previous changes made to valuation principles.
As usual the government have introduced several provisions to counter both tax avoidance and tax evasion. Personal service companies – IR35 – are again in the Chancellor’s sights, and with early indications that public sector compliance is increasing an obvious next step would be to extend the reforms to the private sector. Further consultations are to be published in 2018.
The Chancellor decided against attacking pension tax reliefs – leaving the annual allowance unchanged and actually increasing the lifetime allowance next tax year from £1 million to £1.03 million in line with inflation.
There were some anticipated increases to both the personal allowance and higher rate threshold in line with previous manifesto commitments, with an increase to the National Living Wage from £7.50 to £7.83, and for those of us lucky enough to be under 30 a new railcard will be introduced in Spring 2018 to provide a welcome discount to the younger rail commuter.
The government has also chosen to delay the abolition of Class 2 NICs by a year until 6 April 2019. Class 4 will remain at 9% and will not be subject to the increases previously announced.
Sheen Stickland work closely with small business clients to advise them on how they can best manage the impact these changes may have on their business through the review of their business strategies, ensuring solid management of their cash flow is in place and providing advice and guidance on tax planning opportunities.
If you have any questions about how any aspects of your tax and financial planning may be affected by the Budget, please contact Paula Joyce directly at firstname.lastname@example.org and for further details on all aspects of the changes announced in the Autumn budget, please visit www.sheen-stickland.co.uk