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Some commentators were predicting a quiet budget. The last minute change to the standard Wednesday Lunchtime budget did leave me questioning motivations too. I thought it might be to avoid an awkward Prime Minister’s question time, at a time when things are already tough for the government. Perhaps it was scheduled later in the day to leave little time to digest before tomorrow’s new headlines steal attention away. Maybe the Chancellor just didn’t want to hold a budget on Halloween, as he hinted in his opening remarks.
Starting with self congratulations of intending to decrease the national deficit (as a % of GDP) while maintaining steady growth, the Chancellor also promised to increase spending in key areas… oh and a tax cut for personal tax! Although it is an analysis for the economists I am not sold on how this is being funded just yet. This sounded like a budget for putting money into as many pockets as possible to boost growth but, more importantly, confidence in the UK economy as we enter the most tumultuous phase of the UK leaving the EU.
Last year the Chancellor announced he would no longer be holding two Budgets a year … but his speech today threatened a spring budget in 2019 to deal with the implications of Brexit negotiations, which may or may not have happened by then. We shall see!
In line with our mission statement of being the best all-round advisers to owner-managers we have waded through the Budget report to pick out the areas of importance to you and your business. We have outlined the issues below and given more details and a deeper analysis which can be found in the Impact om Owner Managed Businesses article. However, there is a lot more to digest in the small print, so stay tuned as we continue to analyse this in the coming weeks. We will keep you up to date with anything we find lurking in the detail.
It is not my intention to repeat everything that was mentioned in the budget. I am sure you will have seen the wider aspects from the budget from other sources. This email (and the article) is intended to give a more focused view on what key items affect our clients directly.
The uncertainty of Brexit appeared to weigh heavy on Philip Hammond’s mind in his speech today. Presenting an image that next year he will increase spending on defence and the NHS, whilst appearing to have borrowed conservatively, suggests he has stepped away from balancing the books. Despite all the spending and the tax cuts he alluded to having “headroom” in the budget to buffer against any hiccups along the way. We can only assume this was a hint to Brexit and an attempt to increase market confidence in the UK over the next six months.
There were hints at tax increases but nothing major to affect SMEs, although the impact of the updated IR35 legislation announced may squeeze the contractor sector and generate additional tax revenue for HMRC. It would appear that additional tax will be generated by taxing the likes of Google, Amazon and Facebook and other global digital companies. There is also a continued drive on clamping down on tax evasion. Mr Hammond thought £2billion could be gained for the treasury here but he didn’t comment on how much it would cost to get this money in the form of the enforcement officers, or infrastructure needed. My suspicion is that this is partly from the introduction of the Making Tax Digital systems and has already started from a recruitment drive by HMRC for new inspectors.
It was surprising that Making Tax Digital wasn’t mentioned by name but, as detailed in our ‘Impact on Owner Managers’ section, there were no changes to this is coming in next year for VAT registered businesses (and all businesses from 2020). Yet again the government is relying on others to be the messenger!
Clearly this was a Budget for positive messages. For presenting investment, strength and stability. However the details coming out post-speech show a web of little tweaks to the tax legislation that were not communicated in the speech. It will take time to unravel but the key headlines we have.
The live speech is mostly for the government to present their Budget the way they want it to be perceived. The budget itself is the hundred odd pages of document that is issued by the treasury as the speech starts.
Listed below are the key points we have found so far today, all of which are detailed in the linked article. We have focused on the areas that will be most common to our clients. There is always public debate following the budget and sometimes things can get changed in the coming weeks or significant commissions from the speech can come to light. We will keep you posted.
The brief summary:
The headline of the budget was a tax cut in the form of the Personal Allowance, meaning earners with income up to £100,000 in total will get £12,500 tax free (an increase of £750). The higher rate tax threshold is also increasing to 50,000 – a bigger increase than we expected. A welcome relief following the attempts to increase personal taxes in past years in the form of the reformed tax on dividends, and the threat of national insurance increases.
A key item due to the silence about it! VAT registered businesses have new rules to comply with for MTD, and there were no changes made today to the plan for VAT submissions, coming into force in April 2019. There are some exceptions, but for the most part the message is be prepared for a the big change of allowing HMRC to access more data on your business than ever before. Just using a cloud package isn’t enough to ensure compliance.
Not VAT registered? It was also announced that the plans to bring in MTD rules for all businesses to report quarterly profits and balance sheets will go ahead in April 2020. There is still a lack of details about this as yet. We can make a good guess as to what will be required though.
Other items to note:
We cover all these items in much greater detail on our website. Click the link to see our full article about the Impact on Owner Managed Businesses.
There are some other announcements in today’s speech that may be of interest to you. Some of these points may not impact you directly, but may affect the environment you work in, and therefore help to inform your decisions.
Here is a summary of the points raised:
“The Chancellor responded directly to the BCC’s calls for bold incentives to turbo-charge business investment, for steps to support high street businesses struggling with business rates, and for measures that cut the cost of apprenticeships for SMEs”
Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC)
“Today was another missed opportunity to give London the powers and funding we desperately need to tackle the challenges ahead and properly prepare for the damaging reality of the Government’s bad Brexit”
Sadiq Khan, Mayor of London
“This is a broken promise budget”
Jeremy Corbyn, Labour Party Leader
“This is the most small-business-friendly budget that this Chancellor has delivered. He has listened to our requests across many areas of tax and public policy, putting him firmly on the side of Britain’s small businesses”
Mike Cherry, National Chairman – Federation of Small Businesses