Businesses have responded to the last Budget before Brexit in which the Chancellor Philip Hammond said the era of austerity is ‘finally coming to an end’.
Across the business community, the Autumn Budget has been hailed as ‘rock solid, bringing more treats than tricks’, ‘the most small-business-friendly Budget this Chancellor has delivered’ and one that listens to business concerns by supporting investment and growth.
In a speech that lasted more than an hour, Mr Hammond set out a long list of spending plans in which he promised a brighter future after years of constraint.
A slight increase in growth forecasts were announced, from 1.3% to 1.6% for next year and better borrowing figures than expected.
Among the main measures for business and the economy were:
- Personal allowance tax threshold to rise from £11,850 to £12,500 in April 2019 – a year earlier than planned
- The higher rate income threshold rising from £46,350 to £50,000 in April
- 3.3 million more people in work since 2010 with 800,000 more jobs forecast by 2022
- A rise in National Living Wage from £7.83 an hour to £8.21 per hour from next April
- Business rates bills to be reduced for companies with a rateable value of £51,000 or less
- £900m in business rates relief for small businesses
- £650m to rejuvenate high streets
- New 2% digital services tax on UK revenues of big technology companies from April 2020
- Private Finance Initiative contracts to be abolished
- Annual investment Allowance to rise from £200,000 to £1m for two years
- Apprenticeship levy to be halved from 10% to 5% for small businesses
- Extending changes to the way self-employment status is taxed to medium and large private companies from 2020
Most of the measures have been welcomed by the business community.
‘Budget brings more treats than tricks’ - CBI
Carolyn Fairbairn, CBI Director-General, said:
This was a rock-solid budget, bringing more treats than tricks for business.
It recognises the enormous contribution enterprise has made to balancing the UK’s books through jobs, pay and tax and responds to many of the recommendations that firms have made.
But while the Chancellor has reduced some of biggest barriers to growth, he has missed some opportunities.
That said, the new investment in broadband, research, housing and infrastructure will help tackle the UK’s glaring regional equalities head on.
Ongoing reform of the apprenticeship levy and collaboration with business on retraining reflects long-standing business advice and will help individuals adapt to a fast-changing world of work.
The Chancellor has come up trumps with a bumper package to spur firms to invest more into their factories and machinery, with the improved Annual Investment Allowance and incentives for spending on buildings.
The picture on tax is more mixed. Going it alone on a digital services tax is high risk. The Government should move in step internationally, leading multilateral solutions, or risk losing our global competitive edge in digital.
Smaller businesses will be relieved by the support on Business Rates at a time where the current system is crippling many high streets. But larger retailers and manufactures - and the millions they employ across the UK - will continue to suffer needlessly until there is a full, in-depth review.
‘A shot in the arm for business investment and growth’ – British Chambers of Commerce
Giving his initial reaction to the Chancellor’s Autumn Budget, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:
In an atmosphere of unprecedented uncertainty and heightened political noise, the Chancellor has demonstrated that he is listening to business concerns by delivering a Budget that supports investment and growth.
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. Philip Hammond has sent important and positive signals to businesses across the UK, many of whom have been wavering on investment and hiring. Crucially, the Chancellor has avoided major increases to business tax to fund the Government’s spending priorities, which would have undermined the confidence boost to firms from his commitments to supporting enterprise and growth.
We are delighted that the Chancellor has listened to the voice of Chambers of Commerce and has boosted the Annual Investment Allowance to £1million. This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.
While today’s Budget measures were largely positive for business, the final and most important piece of the jigsaw is a comprehensive Brexit deal that gives firms the clarity and precision they need. The pro-business measures announced in the Budget will only yield their greatest possible results when paired with a Brexit deal that delivers certainty on the UK’s future terms of trade beyond March 2019.
‘The most small-business-friendly budget from this Chancellor’ - FSB
Mike Cherry, Federation of Small Businesses’ National Chairman, said:
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.
On the tax front, small firms up and down the country will be pleased to see the VAT threshold frozen for two years. FSB was credited in the speech for our campaign on this, stopping an over-reach which would have created a mountain of bureaucracy and a tax-hike for more than a million businesses. I look forward to seeing further innovative changes to VAT post-Brexit.
The decision to protect and refocus the Employment Allowance means that small firms will use the £3,000 of help to increase staff hours, improve pay and meet the rising costs of the National Living Wage, boosting jobs and productivity.
Through the Budget, the Chancellor is now using the strength of the Treasury to back small business. We have already seen a significant change of tone in recent months towards helping businesses, right from the top of Government, and today represents the change of policy that backs this up. This is long due recognition that small firms are the UK’s job creators and community leaders. The productivity challenge for this country will only be resolved by backing small business, and today marks an important step to achieve this.
‘Smash and grab’ IR35 plans
One element of the Budget which has not received such a warm welcome is plans to extend IR35 tax rules for those working in the public sector to the private sector.
It means hundreds of thousands of private sector contractors will face higher tax and National Insurance bills from April 2020.
IR35 will affect people who work through their own company for another business, but the Government insists the reforms will not affect those who are genuinely self-employed.
It means that contractors who work in a similar way to employees of a business will be expected to pay tax and NI at the normal 12%, whereas currently many contractors in personal service companies pay less.
The Treasury says the new rules will not apply to the country’s smallest 1.5million businesses.
The plans have been criticised by the Association of Independent Professionals and the Self-Employed (IPSE) who say it will have a catastrophic impact on the sector.
Its chief executive officer, Chris Bryce, said:
The Chancellor has today forced the self-employed into a holding pattern of despair, as they await the introduction of controversial tax changes which could force them out of business from April 2020.
The Chancellor’s smash-and-grab approach to taxing the smallest businesses is short-termism on steroids.
It is a short-term tax grab that will do lasting damage to the economy by taxing out of existence the smallest and most agile businesses.
These are the very businesses the Government and large corporations will need to call upon to provide the specialist skills to navigate our way through Brexit.
This fresh raid on the self-employed comes only a month after the government backtracked on its pledge to abolish Class 2 NICs, costing freelancers an average of £150 per year.”