Review of the Budget – 2 Weeks On

It’s been two weeks since the Autumn Budget. Our initial reactions remain the same, but with more information published in the follow up, it’s time to take a deeper look at the implications for Stockport small businesses.

A Chancellor Under Pressure

It’s been widely reported that the Chancellor of the Exchequer, Philip Hammond MP, is under attack from his own party, due to his apparent scepticism over Brexit.

In preparing the budget, Mr Hammond needed to balance the downgraded predictions of economic growth and poor statistics on productivity, with the need to address issues of housing, austerity, difficulty facing claimants of Universal Credit, the constant need to find money for the NHS etc. All of which were issues that appeared to hurt the government in this year’s snap general election.

No easy task, then, but for a man under pressure, he managed to appear remarkably calm and relaxed, and managed to avoid the possible pitfalls of talking about the advantages of driverless cars.

Budget Speech Review

Maintaining recent budget traditions, Mr Hammond addressed the House for almost exactly an hour. In other respects, though, this was not the usual budget speech: there was very little mention of tax, and almost nothing about raising it.

The Chancellor listed spending promises and tax giveaways, such as headline relief from Stamp Duty Land Tax for first-time buyers, but it was hard to detect anything that would pay for it all.

Much of that will be hidden in the mass of documentation that is released on the Government’s website the moment the Chancellor sits down. In the next few blogs we will be looking at the main tax changes that were announced and the impact on small businesses and taxpayers and when some of these new changes will come into force.

Immediate Effect?

As usual, some are to be implemented immediately, Stamp Duty reform, for example, was to be put into place the minute the Chancellor announced it – good news for people buying houses on 23rd November, bad news for anyone who completed before 12noon on 22nd.

Other changes will take place next year and some are advanced warnings for changes that will be coming into effect in 2019 and 2020. We will keep you informed of important changes that are happening in April 2018, as it can be hard to keep track of all the changes.

Avoiding Another Climbdown

Probably Mr Hammond’s most pressing need was to avoid a repeat of the climbdown forced on him after the March 2017 Budget, when he tried to introduce an increase in National Insurance Contributions, but had to accept that this was contrary to a Conservative manifesto promise.

At this stage, nothing seems to be as controversial as that. The measures to raise tax are either hard to argue with, such as cracking down on avoidance and evasion, or relatively obscure, such as changing the way companies calculate capital gains tax.

Significant Points

1. Stamp Duty Land Tax

Abolished from 22nd November for first-time-buyers on homes costing up to £300,000. No SDLT on first £300,000 of first-time-buyer’s purchase of home costing up to £500,000.

2. Indexation Allowance Freeze

Gives companies relief for the effect of inflation on capital gains and will be frozen at January 2018 for disposals after that date.

3. R&D Credit

The rate of Research and Development Expenditure Credit increases from 11% to 12% from 1st January 2018.

4. Tax Free Allowance Increase

Rising from £11,500 to £11,850; threshold for 40% tax rises from £45,000 to £46,350. Tax rates and thresholds for Scottish taxpayers are to be confirmed by the Scottish Parliament this month.

5. Class 2 National Insurance Abolition Deferred

The abolition of Class 2 NI and the reform of Class 4 NIC for self employed is deferred by a year to April 2019 in order to assess the impact on contributory benefits.

6. VAT Threshold Freeze

The suspected reduction of the £85,000 threshold for VAT was not forthcoming. However, the usual increase of £2,000 did not take place, effectively freezing VAT for the time being. Though the promise is that this is to be reviewed in the coming months.

7. Capital Gains Tax

Annual exempt amount rises from £11,300 to £11,700

Whether or not the Chancellor has steered the economy in the right direction, we will be happy to discuss the impact any of his proposals on you and your finances to help you make the right decision going forward.

 

 

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