What Does The Budget 2017 Mean for My Business?
The Budget, 2017, has been announced and we are detailing what it means for companies.
State of the economy
Despite all the doom and gloom, the UK economy is, generally, doing well. Economic growth forecasts may have dropped. However, there is no sign of a recession on the horizon. Annual borrowing is forecast to be £8.4bn lower than forecast this year, and it is anticipated there will be a net increase of 600,000 jobs by 2022. With Brexit a serious concern for business, an additional £3bn has been set aside for planning for all eventualities.
As part of the budget 2017, the national living wage will rise to £7.83 per hour, from April 2018. Any employees aged 25 or older will be entitled to this as a minimum. In terms of personal allowances, income tax will not be payable for employees earning less than £11,850. The higher rate tax threshold will not kick in until someone is earning £46,350.
Changes are also to be made meaning no benefit in kind taxes are payable for electric cars charged at work. Could this be the return of the Company car as a feasible benefit? However, if employees need to fly, it may be worth considering scrapping any first-class ticket schemes with air duty frozen for standard class, due to increase in premium tickets and private charters.
There is good news in the budget, 2017, for innovative businesses. Those creating new technologies could be entitled to an even greater R&D tax credit up to 12%. A further £2.3bn has been set aside to cover this. Consideration was also given to adjusting the turnover threshold at which your business must pay VAT. However, this is to remain at £85,000 for the next two years.
Those with large fleets of vans may have been concerned about the increase in vehicle tax, in relation to diesel vehicles. It has been announced this change will only affect cars to reduce the burden on business. The bigger environmental concern from businesses at present is the use of single-use plastic items. A future tax on these items is not coming in as of yet, but appears to be on the horizon in a future budget. Now could be the time to consider alternative packaging.
For those involved in the sale and manufacture of alcoholic beverages, duty on beer wine and spirits is to remain frozen with the budget 2017. However, duty on high strength white cider is to increase dramatically. As anticipated, cigarette prices will continue to increase, spelling bad news for the tobacco industry. This could encourage more and more people to become healthier and quit.
Operating tech companies overseas for tax incentives is also set to become less appealing, with taxes being payable on any royalties claimed in low tax jurisdictions.
In terms of business rates, the changes scheduled for April 2020 have been brought forward to April 2018. This means any business rates increases will rely on the much lower CPI figure, rather than the RPI figure. It has been estimated this will save businesses £2.3bn over the next two years.
At the same time, an uplift on council tax premiums of 100% has been added for empty properties. This measure has been introduced to help renters, and push private rents down, leaving a high cost to holding out for a tenant who will pay the rent they are seeking. This will, of course, cause some concern for landlords and property management companies.
Developers are being pushed to, essentially, get on with building. Compulsory purchase has been streamlined, where land is being held hoping for future market movements, stopping delays in building. Any delays in permitted developments commencing will be investigated with due prejudice. It will also be more attractive for developers to appeal to first time buyers, with stamp duty abolished for any properties worth less than £300,000, and reduced for those worth less than £500,000. It is anticipated these changes will produce 300,000 more homes per year.
While still largely being an austerity budget, there is still investment for new innovations. £500m has been promised in developing new technologies, including 5g mobile networks, improving fibre broadband and artificial intelligence. A further £540m has also been promised to develop electric cars, focused on charging infrastructure and speed. Now is a good time to develop in these areas.
There is good news for the north east following the SSI fallout, with £123 million pledged to redevelop the site. North sea oil and gas are also to be encouraged with additional tax breaks offered to promote further investment.
While there is still a long way to go for the UK economy, there are still significant plans for new and innovative businesses moving forward. If you have any concerns that the budget may adversely affect your business and you may need help, do not hesitate to contact one of our business rescue experts.