‘Spreadsheet Phil’ Hammond took to the dispatch box today to deliver his first spring budget (and probably his last ever – from now on they will be delivered in the autumn). Here’s a round-up of the key announcements that will affect businesses.
1. A tax raid on the self-employed
The government is frustrated that the growing proportion of people working for themselves is taking its toll on the exchequer. To that end it will increase the rate of Class 4 national insurance contributions paid by the self-employed from 9% to 10% next year and 11% in 2019. And the tax-free dividend allowance, which allows those who are paid via their own limited company to avoid tax, will be cut from £5,000 to £2,000 from next April.
2. Respite on digital taxes for small firms
The incoming changes to the way businesses pay their taxes, the so-called Making Tax Digital scheme, have proved controversial as many fear they will create a fistful of new red tape for small firms to deal with. The government is pressing on with the scheme but the smallest companies (those with a turnover below the VAT threshold) will have now have until 2019 (an extra year) to comply.
3. Funding for ‘disruptive technologies’
Hammond announced £270m of funding for new technologies ‘that have the potential to transform the UK economy,’ to be delivered through the Industrial Strategy Challenge Fund. This will be spent on developing batteries for electric vehicles, AI, robotics and biotech projects.
4. Support for those hit by rates changes
The forthcoming business rates revaluation has been a cause of worry for many. Though it is long overdue and will reduce the tax burden of many firms, it will also leave some with a much larger tax bill. Hammond is giving £300m to councils to use at their discretion for rate relief and is offering pubs the chance to apply for a £1,000 discount for one year from this April.
5. But a sting in the tail for tech start-ups?
Hammond also hinted at possible future reform of the rates system, which could be bad news for digital companies. ‘It is certainly true, in the medium term that we have to find a better way of taxing the digital part of the economy - the part that does not use bricks and mortar,’ he said.
6. New consumer rules
‘The government,’ Hammond said, ‘recognises that sometimes markets, particularly in fast developing areas of the economy, can fail people.’ To that end it plans to introduce new rules in the future to ‘protect’ consumers from unscrupulous companies. It’s all a bit vague for now but it seems the government could come down hard on companies that mislead customers in the not too distant future.
7. Infrastructure spending
Hammond wants to tackle the gap in productivity that separates the UK from many of its European cousins. One of the things holding us back, he reasonably suggests, is our poor infrastructure. He will spend an extra £690m on new local transport projects and £220m to improve ‘congestion points’ on national roads. And his National Productivity Investment Fund will drop £740m on the country’s digital infrastructure by 2020-21, including funding for 5G, the next wave of mobile tech.
8. More skills funding
The chancellor confirmed the government’s plans to fund more free schools, including selective schools – leading its opponents to claim it is reintroducing grammar schools by the back door. But he also pledged to spend a wodge of cash on new ‘T-level’ technical qualifications for 16-19 year olds to learn about fields like digital, agriculture and construction. The government will also introduce maintenance loans for students doing higher-level technical courses at National Colleges and Institutes of Technology, levelling the playing field with university students.
9. Life-long learning
The world of work is changing fast. Hammond said he recognises the importance of people retraining at least once in their lives to ensure they remain part of the workforce. He will spend £40m on pilot scheme to ‘identify what works best and help the next generation learn and train throughout their lives.’ Small beer but a step in the right direction.
10. More devolution cash
The government is keen for the UK’s regions to ‘take control of their own economic destiny.’ Hammond said tomorrow he will publish his strategy for the awkwardly named ‘Midlands Engine,’ cousin to the ‘Northern Powerhouse’. And he has reached a deal with London’s mayor, Sadiq Khan, on further devolution for the capital. Hammond also promised an additional £350m for Scotland, £200m for Wales and £120m for Northern Ireland
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