Spring Budget recap and reaction
Chancellor Philip Hammond this afternoon signalled tax rises for the self-employed and company directors as he pledged to lay the groundwork for a "brighter future" for Britain as it looked to leave the EU.However small businesses leaders warned his move to hike the National Insurance paid by the self-employed undermined the government's mission for the UK to be the best place to start a business.
Mike Cherry, Federation of Small Businesses chairman, said: "The National Insurance rise to 10 per cent next year and 11 cent in 2019 should be seen for what it is – a £1bn tax hike on those who set themselves up in business."This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business.
"Future growth of the UK’s 4.8 million-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”The Chancellor announced the main rate of Class 4 National Insurance contributions for self-employed people would rise by 1 per cent to 10 per cent in April 2018 and go up to 11 per cent in April 2019, raising £145m a year by 2021-22 at an average cost of 60p a week to those affected.
Turning to corporate taxation, he unveiled measures to slash the tax free dividend allowance from £5,000 to £2,000 in April next year. Mr Hammond said the dividend allowance had encouraged the proliferation of incorporation.Corporation tax will fall to 17 per cent by 2020 as planned, MPs were told.
In his Spring Budget he also unveiled a number of business rates relief measures, including a £1,000 discount for pubs with a rateable value of under £100,000. He said that measure would affect 90 per cent of pubs in England.He announced the creation of a £300m fund for businesses facing large increases to their rates bills and said any business losing existing relief will not pay more than £50 a month.
Mr Hammond said that those three measures amounted to an extra £453m cut to business rates.As part of measures to bridge Britain's productivity gap he also spoke about the introduction of T Levels - clearer system of education designed by employers. He said the government was investing to deliver in full "game changing reforms" and to make young people work ready.
Mr Hammond also announced £2bn for social care in his Budget spending package, as well as £90m for the North of England as part of a drive to address pinch points on the national road network.He also pledged to make "Britain the best place in the world to do business".
What do you think? email email@example.comDavid Bailey, commercial property disputes partner, Napthens: “We welcome the news that the Chancellor has listened to the concerns of the business community. Business rates can be a big issue for many businesses, particularly SMEs and those landlords facing long periods of a property being empty.
“It’s good to see that the licensed trade is being given specific relief as this is a sector that has publicly struggled in recent years, and while it looks many like most areas should see reductions in business rates, we welcome the fund to deliver support to what the Chancellor called ‘hard cases.’“However, as always the devil is in the detail, and we have already been told by the Chancellor that cuts in tax in one area will likely be matched by increases in others.
“What these announcements will mean for businesses in the long term is difficult to predict, and as yet we don’t have full details of how the reform of the system, or the allocation of funds via the new discretionary relief system, will work.”
Jane Parry, managing partner at PM+M: "The chancellor’s opening statement about productivity still being too low, families feeling squeezed, the need to make Britain ready for its ‘global future’ outside the EU and having an economy that ‘works for everyone’ was all pretty standard stuff which no-one would really disagree with or be surprised by. That tone ran through a Budget that was clearly designed to reassure the markets as we approach the triggering of Article 50."This Budget was a bit of a non-event. There were no real surprises or shocks, which was to be expected, as the government will not want to rock the Brexit boat. However, we might see some significant change in the way that employed and self employed people are taxed over the next few years, stemming from some of the consultations and reports launched today."
Tony Medcalf, tax partner at chartered accountants Moore and Smalley: “As predicted, this was a more sober budget than in recent years. Mr Hammond focused more on the figures, than the headline grabbing policies.
"I think the business community will be largely underwhelmed, but at the same time business owners may welcome not having more government changes thrown at them.”
Colin Tice, tax partner at Cassons: "The number of self employed has increased significantly over recent years, meaning they have become a target for tax increases."In what appears to be a clear breach of the Conservative Party 2015 election manifesto not to raise certain taxes or national insurance, the main rate of class 4 national insurance will increase by 1 per cent in April 2018 and another 1 per cent in April 2019, costing up to an extra £350 each year.
"The smallest self employed businesses with turnover less than £85,000 received a small bonus by the deferral of the introduction of “Making Tax Digital” quarterly reporting until April 2019."
Richard Halstead, interim region director in the North West for EEF: “Current economic indicators offer the Chancellor confidence about the resilience of the UK economy, but we remain some way off from possible Brexit uncertainty. As such, the Chancellor is right to be pragmatic, recognising the need to avoid jam today and saving the fiscal jam tomorrow to use wisely if the economy encounters turbulence during the process of exit from the EU.“This statement shows government sticking with the challenge of raising productivity levels in the UK economy, this alignment with the industrial strategy priorities will be welcomed by businesses as demonstrating signs of much-needed cross-government coherence.
“While this Budget doesn’t have all the answers to our future growth challenges, the evolution of the R&D tax credit, action on digital infrastructure and regional road networks, together with additional investment in technical skills and lifelong learning is a solid foundation on which future statements must build.“Manufacturers will, however, be very frustrated by the positive headlines that might be generated by the action on Business rates which did not extend to the removal of plant and machinery that could have added further to the overall productivity package.”
Carolyn Fairbairn, CBI director general: “This is a breakthrough Budget for skills. There has never been a more important time for the UK to sit at the global top table of technical education for young people. Firms will be looking for ongoing partnership with the Government as they try to make the Apprenticeship Levy work.
"However, with inflation rising and the cumulative burden weighing on businesses’ shoulders, limited relief for firms hit hard by business rates falls short. Firms are wholly committed to the health and wellbeing of their people, and are pleased to see an increase in spending on social care.”
Martyn Kendrick, regional director of Lloyds Bank Commercial Banking in the North West: “Many companies will welcome the Government’s commitment to boosting skills among 16- to 19-year-olds through the creation of ‘T-levels’."Businesses have found it difficult to access people with the right training and skills, with our latest Business in Britain report showing that nearly a third of North West companies that recruited in the second half of 2016 had difficulty finding staff with appropriate skills.
“The new ‘T-levels’ will particularly help construction and manufacturing companies across the North West, helping to provide both employees and employers with the specific skills that they need to thrive."The Chancellor's continued commitment to the North's transport infrastructure through a new £90m fund will also be key for the region’s firms, and many will welcome the plans to improve connectivity to the rest of the UK."
Kevin Taylor, tax consultant at WNJ: “In a Budget of relatively little content, two of the main announcements detrimentally affected the tax positions of small businesses and company directors, as the Chancellor looked to ‘equalise’ the tax system for all individuals earning similar amounts of income.
"The measures will increase the tax costs for entrepreneurs looking to build their own businesses and bolster the country’s economy, in addition to adding to the burden for existing businesses.”
James Thompson, Taylor Patterson: "Having become accustomed to the twists and surprises of George Osborne’s budget announcements, Philip Hammond has left us, as Wealth Management and Employee Benefit advisers, with very little to comment on."The robustness of the UK economy continues to surprise on the upside and whilst there is no immediate link between economic and investment market health, investor behaviour should remain stable for now in the face of relatively buoyant indicators."
Lee Petts, chair of the Institute of Directors - Lancashire branch: “The Budget goes some way to address the concerns of businesses here in the North West who have been facing uncertainty about the future since last year's historic Brexit vote. We hope that the announcements including measures to improve the impact of business rates reliefs and investment into local broadband networks will help to boost confidence and encourage our members to continue with investment into their businesses, which will in turn enable the continued growth of our regional economy.
“In relation to this, the re-commitment to the the Northern Powerhouse and investment into road infrastructure in the North is welcomed by the IoD, as it signals the Government’s priority for the continued development of the region."Additionally, we support the measures which will stimulate investment in training, particularly for young people. It is essential that the Government continues to talk to businesses, both here and throughout the UK to identify where the skills gaps are and how training is best placed to meet the needs of the local economy.
"Finally, we welcome the announcement of a business rates consultation which will help companies in the North West who have been feeling the pressure from last year's revaluation. These measures, including the fund for local councils to offer flexible, discretionary assistance should work hard to help companies bring forward productivity-boosting investment."
Mark Rathbone, partner, Brabners: “Detail on transport infrastructure was perhaps not as expansive as many businesses would have liked. The £90m for road improvements in the North will be welcome news for commuters and hauliers, though it is not a huge allocation given government’s plans to increase national infrastructure spend to 1.2% of GDP per annum.“Notable by its absence, was an outline of how increased investment will be allocated. The political and media focus has consistently been on passenger transport projects such as HS1, 2 and 3. What is equally important is infrastructure focused on the efficient movement of freight and the relationship of this to passenger movements. This is something I would have wanted to see the chancellor acknowledge in his speech.
“We continue to see grand schemes like high-speed rail and the Heathrow expansion announced without any national strategy outlining how our infrastructure, planned and existing, can better connect to serve the whole nation most effectively. There has been significant recent private investment and leadership on infrastructure in the North West. A detailed national strategy to back the proposed increase in public spending would help our businesses plan for the future and encourage further private sector investment in the UK economy.”
James Morris, tax partner at RSM: "The chancellor used this Budget to hone his stand-up skills rather than announce a wide raft of tax measures but between the jokes, there were some significant revenue raisers."As expected the Chancellor announced some respite for small businesses who are due to be hit with the highest rises in business rates, with a specific protection for pubs. The detail of these reliefs is likely to prove a welcome relief to small businesses in Lancashire. However, the measures to lighten the load are being received as something of a sticking plaster rather than a fundamental immediate reform.
"Last year’s Budget red book stretched to 148 pages, this year’s was just 64 pages. Perhaps the chancellor is holding back from more significant tax reform at the first Autumn Budget."
Steve Blacker, partner, innovation reliefs and incentives, KPMG in the North West: "Business will welcome the Chancellor's announcement in the Spring Budget to reduce the administrative burden on claiming R&D credits and tax incentives. Simplicity and certainty are key to business."However, whilst the Chancellor believes the UK regime is globally competitive, we need to make sure the UK is not complacent. The Chancellor could have used this opportunity to increase the value of the R&D Expenditure Credits regime. We suggested a rate increase from 11% to 12.5%, to give a net (of tax) benefit of 10%. In a competitive global market, this would have provided strong positioning for the UK. "Our other hope is for a more joined up approach between incentives for investing in R&D, both tax incentives and grants, with incentives for exploiting the output of R&D. Incentives that encourage investment in UK production facilities exploring the R&D will ensure businesses lay foundations in the U.K. for the long term."