Brief run down
Phillip Hammond delivered his third budget speech as chancellor this week, where he vowed to “end austerity” and provide for “the strivers, the grafters and the carers who are the backbone of our community”. Claiming to “save public services” Hammond confirmed that an extra £20.5bn will be put into the NHS – with an extra £2bn being invested into mental health services, £700m for councils, with additional funding being implemented into public schools.
Pledging to line the pockets of low earners too, Hammond announced there will be an increase in national minimum wage, personal allowance – boosting an earner’s none-taxable income to £12,500 saving basic tax payers an annual saving of £130 – and work allowances for 2.4 million working families by £630 per year.
The budget has been stretched across various environmental, economic, militant and technological sectors, with £500 million being put aside for if a no-deal Brexit negotiation is to arise. Contrastingly, a shiny new 50 pence piece is also on the cards with intentions to celebrate the UK’s successful departure from the EU.
However such ideological economic phenomena has predictably been hit with controversy. The revolution foundation has announced that poorer families will only be better off by £30 per year, with 10% of top earners being £410 richer. Moreover, Labour MPs have argued that the “biggest budget giveaway since 2010” will be “gobbled up quickly by the health service” and after that, there won’t be much left to go around.
Hammond’s extra spending on the NHS, defence and international aid, is set to burden cuts in other unprotected departments. The thinktank has predicted 52% of cuts will hit the Department for Business between 2010 and 2023 – 24.
How will the new budget affect businesses?
“This year’s budget isn’t just about funding public services but making the choice to invest in research, infrastructure, to manage change – not hide from it.”
Annual investment allowance increase
Capped to £200,000 from January 1st 2016, the new expansion in investment funds has meant that businesses can invest up to £1,000,000 from January 2019 for up to two years.
The increase is likely to be advantageous for large and medium-sized businesses such as plant and machinery investors, who spend up to the current £200,000 threshold. Similarly, micro businesses are set to prosper from the change, as despite being small scale, some smaller firms have significant capital expenditure and regularly exceed their first year allowance claims.
Changes in IR35
The IR35 is making its debut in the private sector, after coming into effect in the public sector from April 2000. This is because many contractors via personal service companies, who are performing the same job roles as contracted employees, are being charged insufficient income tax and NI.
Estimated to be the biggest revenue-raising measure in this year’s budget, from April 2020, larger businesses will become responsible for charging their contractors tax and NI correctly. The rule change won’t affect the UK’s smallest businesses that make up approximately 1.5 million businesses.
However, Lee Murphy, founder of accounting software firm Pandle, said:
“The Chancellor implied some contractors would escape IR35 as it will only apply to large and mid-sized businesses, but the reality is the vast majority of contractors work for such organisations, not small businesses.”
‘”Contractors, especially highly skilled IT ones, will be forced to join umbrella companies and pay more tax and national insurance.”
Critics have similarly accused the chancellor of hurting thousands of people who are self-employed, and burdening businesses too. But the Treasury insisted that the reforms would not affect anyone who was genuinely self-employed.
Investing in Britain’s future
“Our tax system must evolve alongside technological investments”
First announced in 2017, the transforming cities fund allocates various spend across cities within the UK to develop and improve public services. This year’s £1.6 million allocation will enhance transport facilities, digital catapults and upskill work environments, such as contributing £10 million for a new pilot in Manchester that will develop self-employed workers.
Additionally, Phillip Hammond’s budget will support businesses in taking on new employees. Businesses will now only have to fund 5% of the apprenticeship levy in comparison to the previous 10%, totalling to a £690 million investment. This will make the employment process more accessible for businesses, offering them the opportunity to incorporate fresh insight and innovation into the workplace, whilst inspiring future generations with relevant industry experience.
Digital tax allowance
Introducing a new kind of tax law, Philip Hammond has announced online doyens such as Google and Facebook will be faced with digital service tax going forward. This is from tech giants such as Amazon being called out for their low tax payments, their tax outgoings being insignificant in relation to their £1.9 billion quarterly revenue. The new allowance will predictably accumulate £400 million and will be introduced by 2020, however only to the UK thus far. This has disgruntled experts in the field who have acknowledged the potential risk from uninvolving international countries, who were yet to agree to the law. Multinational organisations may not bode well with the unilateral decision the chancellor has made.
Will your business be effected by the new budget? Comment below with your thoughts on the impact of the chancellor’s speech.