Philip Hammond told us that the era of austerity was ‘finally coming to an end’ but did he deliver a budget to match?
He started with some positive news on jobs and growth with the forecast for growth up slightly. The largest items of spending had been trailed in advance for maximum publicity so it was no surprise that there was an extra £20.5bn for the NHS. However, the extra £1bn on defence spending came as a surprise plus the additional £10m ear marked for the welfare of veterans. Schools are to receive an extra £400m which equates to £10,000 per primary school and £50,000 for each secondary school. A politically popular Digital Services Tax is also to be introduced on a ‘narrowly targeted’ number of large tech companies such as Google and Amazon. This is not designed to catch tech start- ups. There was an extra £500m for the infrastructure fund (now standing at £5.5bn) which will allow for the development of a further 650,000 houses.
What did the budget deliver for small businesses and their investors?
There was some good news for small businesses with Business Rates for certain small businesses being reduced by one third over the next two years and the apprenticeship levy halved to 5%. Councils will have access to a £675m fund to help redevelop declining high streets which small businesses should benefit most from.
In a not unexpected move, Philip Hammond also tightened the rules on claiming entrepreneurs relief. Some feared he would scrap it altogether but instead he has extended the minimum qualifying period from 12 to 24 months and this will be brought into force next year. There were also tighter rules on the rights that the shares giving rise to the relief enjoy. This change comes into effect immediately and will mean that overnight some who thought they were entitled to the relief no longer are. This may affect owners who are currently planning a sale.
Certain changes to the taxation rules for those with self-employed status working through ‘personal service companies’ for medium and large private companies will be brought into force but not until April 2020 (rather than April 2019 as was anticipated) giving time for those affected to consider their arrangements. This brings the arrangements into line with those working in the public sector but does not affect small companies.
And for individuals?
There was also some good news for individuals as the Chancellor says the government will meet its promise to raise the personal allowance from £11,850 to £12,500 and raise the higher rate tax threshold from £46,351 to £50,000 one year earlier than planned. Those changes will now come into effect in April 2019 rather than April 2020. However, the benefit for higher rate tax payers is off-set by tweaks to the National Insurance rules which will reduce take home pay.
In less good news, the Chancellor announced that he would limit the Capital Gains Tax relief on the sale of a second home from April 2020 to those landlords who are in shared occupancy with the tenant – currently shared occupancy isn’t required for landlords to benefit from this relief. There are further restrictions on claiming this relief for the last 18 months before disposal.
The government has also made good on its pledge to help those in debt, extending the proposed moratorium on legal action and interest charges to 60 days and offering better legal protection for debtors once a plan is in place. Charities dealing with people in crisis have welcomed the changes but are keen to see a timetable for introduction.
Disappointing news for environmentalists as there is to be no ‘coffee cup’ tax and, although there is a proposed new tax on the import of plastics containing less than 30% recycled material, the details and timing of introduction have been left entirely vague. There will be a further £500m put aside to pay for Brexit preparations. In addition, the Spring budget may be a full budget depending on progress of Brexit negotiations and the need for further measures. Essentially the budget has been drawn up on the basis of a benign exit from the EU and if that doesn’t transpire it will be back to the drawing board for the Chancellor.
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