Budget 2017 – Highlights for business owners

The Chancellor, Philip Hammond, has delivered his budget speech and we’ve summarised the highlights for business owners:

 

Opportunities for entrepreneurs

The Chancellor has set UK productivity and technical education as the cornerstones for his Budget speech. This brings a number of opportunities in some industries, in particular:

  • Adult social care.
  • NHS service provision.
  • Education service provision.
  • STEM companies, especially robotics, driverless cars and biotech.
  • Recycling.
  • Mobile and digital infrastructure.
  • Road infrastructure.

 

In addition, there has been some mitigation of tax pain for some industries:

  • Road hauliers will see vehicle excise duty and HGV road user duties frozen. In addition, fuel duties have been frozen.
  • Pubs with rateable values under £100,000 (90% of the total) will get a business rate reduction of £1,000.
  • £300m fund for local authorities to help businesses hit by large rate rises
  • Businesses coming out of small business rate relief will get an extra cap to ensure their costs will rise by no more than £50pm.

 

Economic background

The economy is forecast to keep growing, but while the growth forecast has been upgraded this year, it has been downgraded for the next three years. GDP growth is forecast to be 2.0% in 2017, 1.6% in 2018, 1.7% in 2019 and 2.0% in 2020.

Inflation is predicted to be 2.4% in 2017, 2.3% in 2018 and 2.0% in 2019. The Office for Budgetary Responsibility expects to see consumer spending slow and private investment to remain subdued.

Productivity remains relatively low for a developed nation. In 2015 productivity per hour stood 18 percentage points below the G7 average and 35 points behind Germany. It is forecast to rise by 1.6% in 2017, 1.5% in 2018, 1.7% in 2019, 1.8% in 2020 and 1.9% in 2021.

Unemployment is forecast to rise as the economy slows: 4.9% in 2017, 5.1% in 2018, 5.2% in 2019 and 2020, then 2.1% in 2021.

Borrowing is forecast to fall from £51.7bn this year to £16.8bn in 2012/22, 0.7% of GDP.

 

Changes for businesses

  • Quarterly reporting requirements for small businesses to be delayed by a year.
  • Any business coming out of small business rate relief will get an extra cap ensuring their costs will increase by no more than £50pm.
  • £300m fund for local authorities to help businesses hit by large rate rises.
  • Corporation tax to be cut to 17% by 2020.
  • £1,000 reduction in business rates for the 90% of pubs with a rateable value under £100,000.
  • More awareness raising around R&D tax credits.

 

Changes for employees

  • Minimum living wage to rise to £7.50 from April.
  • Personal allowance rising to £11,500 from April and to £12,500 by 2020.
  • Higher rate tax threshold rising to £45,000 from April 2017 and to £50,000 by 2020.
  • £5m fund to help people return to the workforce after career breaks.
  • Working parents with children aged 3 and 4 to get 38 hours’ free childcare per week.
  • £2,000 pa childcare allowance for parents with children under 12.

 

Strategic investments

  • £300m to fund STEM research, particularly in robotics, driverless cars and biotech, including £90m to fund 1,000 new PhDs and £160m for new fellowships for early and mid-career researchers, plus up to £25,000 loans for PhD study.
  • T Levels to make technical education as valued as academic education.
  • 2.4m more apprenticeships, on top of existing 3m, and 15 career-specific pathways.
  • Maintenance loans to be made available for students at technical colleges.
  • £16m for new 5G mobile hub.
  • £200m to encourage development of local full fibre broadband networks.
  • Review of options to maximise remaining North Sea oil announced.
  • Midlands Engine Strategy to be released tomorrow.
  • £2bn extra funding for adult social care over next 3 years, of which £1bn available this year.
  • £690m to reduce urban congestion.
  • £325m for Sustainability and Transformation Plans for the NHS available before autumn.
  • £216m to invest in improving school conditions.
  • £40m to pilot new approaches to lifelong learning.

 

Levies and laws

  • ‘Sugar tax’ bands confirmed as 18p and 24p.
  • Vehicle excise duty frozen for road hauliers.
  • HGV road user levy frozen.
  • Cash basis entry and exit thresholds to increase to £150,000 and £300,000.
  • Packaging recycling targets will be set in law at: 75% of paper, 65% of aluminium, 85% of steel, 48% of wood packaging by 2020.

 

Personal finances for business owners

  • Tax free dividend allowance to be reduced from £5,000 to £2,000.
  • Class 4 NICs for self-employed people to be increased by 1% (to 10%) in 2017 and again in 2018 (to 11%).
  • ISA allowance to be increased to £20,000.

 

 New reviews, strategies and consultations

  • Midlands Engine Strategy to be announced tomorrow
  • Taxation of benefits in kind call for evidence
  • Employer-provided accommodation consultation
  • Income tax relief for employees’ expenses call for evidence
  • Green Paper on long term funding of social care to be published this year
  • Patient capital review to encourage long term investment
  • Red diesel call for evidence
  • VAT collection method for online sales call for evidence
  • Missing trader VAT fraud in construction sector consultation
  • Guidelines for employers who pay for employees’ image rights
  • National Insurance Employment Allowance under active monitoring due to NICs avoidance
  • Consumers and markets green paper
  • Air quality consultation

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