What does the 2018 Budget mean to you?
It’s that time of year again. On Monday afternoon Mr Hammond made his 72-minute speech and as always, there’s good news and bad news for both business owners and individuals.
Firstly, we must be doing something right because statistics show that there are 3.3 million more people employed in the UK than there were in 2010, which is great news. We are creating jobs! Another 800,000 are forecast by the year 2020, we are moving in the right direction!
The Autumn statement claims that wages are at their highest rate in nearly a decade so not only are we employing more but we are paying more too.
The good news is that there appears to be plans in place to support small businesses
The Chancellor has stated that the “era of austerity is finally coming to an end” and Government spending will now start to increase.
There is a flip side to the positives that can be taken from this Autumn Statement. We are still in a state of high borrowing and some believe that the extra funding promised to services such as the NHS will be swallowed up by the deficit from previous years. Brexit is obviously still the ‘elephant in the room’ and casts a lot of uncertainty over the financial future of the UK. Mr Hammond announced that, with regards to Brexit, “he reserves the right to take whatever action is appropriate if there is a material change to the outlook”, therefore leaving a clear path for changes to be made over future months.
Personal Tax and Wages
The personal allowance threshold will rise from £11,850 to £12,500 in April 2019, this is a year earlier than planned which shows the economy is looking a little healthier.
The higher rate income tax threshold, the one that says the more you earn, the more you pay, is also set to rise from £46,350 to £50,000. The rate is still set at 40% but, we can be thankful for small mercies. This will also come in to play in April 2019.
Employees will benefit from a 4.9% increase in the National Living Wage from £7.83 to £8.21 an hour from April next year. The National Minimum Wage is also set to rise in line with the Low Pay Commission’s recommendations.
From April 2020 several self-employed contractors and consultants will have to pay a higher rate of tax and National Insurance when the rules of IR35 are extended to individuals HMRC deem to be employees.
The government are clearly showing their support for Apprenticeships within small businesses by proposing that their apprenticeship levy contribution will decrease from 10% to 5%.
Business rates for firms with a rateable value of £51,000 or less will decrease by a third over two year which will be a great benefit to independent retail units, pubs and restaurants.
Whilst the annual investment allowance has been increased for the next 2 years from £200,000 to £1m, this Budget sees Private Finance Initiative contracts brought to an end.
Fuel duty has been frozen for the 9th year in a row.
There will be a consultation around the introduction of a new tax for digital services of 2% that could come into force from April 2020 that will affect online giants such as Facebook.
Mr Hammond has allocated £500m to the Housing Infrastructure Fund to enable 650,000 homes to be built and has agreed that there will be new partnerships with Housing Associations to deliver 13,000 homes across England.
Whilst first time buyers of shared ownership properties up to £500,000 will now benefit from first-time buyer’s relief, lettings relief has been limited to properties where the owner is in shared occupancy with the tenant.
A new tax on plastic packaging that does not contain 30% recycled material is being introduced. The anticipated ‘plastic cup’ tax has been ruled out for now but will be reviewed if necessary.
A £30bn package for England’s roads has been allocated to fund repairing our motorways and potholes.
There will also be a 30% growth in infrastructure spending.
Education and Health
Mr Hammond has placed an emphasis on Mental Health services in this Autumn Budget. This can only be commended given that the cost of poor mental health to the local economy is estimated to be between £74bn and £99bn per year and 300,000 people with a long-term mental health condition leave employment each year (Stevenson & Farmer, October 2017).
There will be an extra £2bn per year for Mental Health Services. New Mental Health Crisis Centres will be set up and there will be more Mental Health ambulances to provide emergency care to those suffering. There are also plans for a Mental Health crisis hotline to be established.
In addition to this £10m will be allocated to air ambulances and an extra £700m will be made available to councils for the provision of care to the elderly and those with disabilities.
A one-off, £400m bonus will be given to schools to help them to buy ‘the little extras they need’ this year.
Obviously, Brexit negotiations are ongoing, and the Chancellor has ringfenced an extra £500m for preparations for leaving the EU and has stated that the Spring Statement in March 2019 could be upgraded to a full Budget if needed.
A more detailed account of the Budget will be provided shortly but if you have any questions in the meantime please do get in touch.