Autumn Budget 2017 Key Announcements for Small Businesses

For the small business owner there was a fair amount to digest following Chancellor Philip Hammond’s first Autumn Budget on 22 November. Here we provide an at-a-glance summary of the key points.

VAT Threshold

There were murmurings of a potential change to the VAT threshold, but this has remained at £85,000 for at least the next two years, most likely due to heavy opposition from small business organisations. The news has been welcomed by bodies such as the Federation of Small Businesses (FSB), which have been campaigning on the subject of VAT reform for some time, arguing that it has the potential to drain the resources of the smaller business. The stay could however be just a temporary measure, with a rumoured overhaul to the VAT system coming in 2020.

Business Rates

From April 2018 the Retail Price Index (RPI) will be replaced with the Consumer Price Index (CPI) with the CPI being used to calculate business rates. This should in practice save businesses quite significantly, with collective savings reckoned to be in the region of £2.3 billion over three years.

Staircase tax was abolished with a promise to business owners affected by it since it was introduced that their original rates bills would be reinstated. There was also an announcement that following the next business rates revaluation in 2022, such revaluations will take place every three years rather than every five years.

Tax-Free Personal Allowance

The personal allowance has increased from £11,500 to £11,850 per year. This will result in an overall tax reduction in 2018/2019 of £1,075.

Research & Development Tax Relief

Small businesses that conduct research and development and claim the RDEC standalone tax credit will benefit from further tax relief measures. The rate will increase from 11 per cent to 12 per cent of a firm’s qualifying research and development expenditure.

British Business Bank Boost

The British Business Bank (BBB) has been given a funding boost of £2.5 billion. This comes as part of a larger £20 billion Patient Capital investment designed to assist fast-growing businesses in scaling-up. The funding has the objective of encouraging more long term investment in scale-up businesses carrying a greater risk. It’s the biggest government commitment to date to the BBB.

National Living Wage

The National Living Wage (NLW) paid to workers aged 25 plus will increase to £7.83 from £7.50 per hour, resulting in a £600 per year increase.

Partnership Tax

Legislation has been updated to fall in line with commercial arrangements for allocating profit shares with the objective of avoiding additional administrative burdens for taxpayers. The changes will come into effect as of the tax year 2018-2019.

Marriage Allowance

The Marriage Allowance – the amount of unused personal tax allowance that can be transferred between spouses or civil partners – will increase to £1,185 as of April 2018. Marriage allowance claims are now allowable on behalf of deceased spouses and civil partners as of 29 November 2017.

If you have any queries or concerns about the changes brought in by the latest Budget, why not discuss them with your local bookkeepers?

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