Chancellor Philip Hammond delivered the first Budget on a Monday since 1962 - his final fiscal statement before the UK prepares to leave the European Union (EU).
Prior to Mr Hammond’s 3.30pm speech on 29th October, Downing Street confirmed that all spending commitments set out in Budget 2018 would be delivered “irrespective” of the UK’s proposed deal with the EU.
In this summary, we outline the key points of interest from the Chancellor’s Budget 2018 for the UK’s army of small business owners and self-employed professionals.
Fuel Duty frozen for ninth successive year
Prime Minister, Theresa May had already confirmed that Fuel Duty would be frozen for a ninth year running earlier in the summer, but it was still welcome news from the Chancellor today. The freeze on Fuel Duty will have saved the average car driver £1,000 and the average van driver £2,500 since 2010.
Personal Allowance increases accelerated
The amount of money you can earn before paying income tax will rise next year. The Chancellor has committed to increasing the Personal Allowance to £12,500 from April 2019 rather than the Government’s election manifesto plans of April 2020.
He explained that a basic rate taxpayer will pay £130 less income tax in 2019/20.
The Higher Rate Threshold for income tax – which currently stands at £46,350 – will also be increased to £50,000 from April 2019. Hammond confirmed that changes since 2015 had taken 1.7 million people out of tax altogether and nearly 1 million out of the higher tax rate.
Apprenticeship fees halved for small firms
The Chancellor unveiled a £695 million package to support apprenticeships across the UK, reducing the financial commitment that small business owners must make when taking on apprentices by 50%.
Currently, small firms pay 10% towards the training of apprentices, but from April 2019 this will be halved to just 5%.
Hammond said: “As well as backing businesses to invest and grow, we will also make sure British workers are equipped with the skills they need to thrive and prosper”.
Increase in the Annual Investment Allowance
The Chancellor opted to increase the Annual Investment Allowance – that allows firms to deduct qualifying capital expenditure from its taxable profits – from £200,000 to £1 million for the next two years in a bid to stimulate business investment.
Carolyn Fairbairn, director-general, Confederation of British Industry (CBI), said: “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”.
Employment Allowance retained for small businesses
As of April 2020, the government will be limiting the Employment Allowance – which exempts the first £3,000 of employers’ National Insurance contributions (NICs) – to small firms with employers’ NICs totalling less than £100,000 per annum.
It is believed this decision will ensure the majority of small businesses can retain this exemption.
Lettings relief limited
The Chancellor has announced a limit on lettings relief that will disappoint many landlords. This relief is used to minimise capital gains tax payable on the sale of a property, which has been used as landlords’ sole or primary residence and for letting as private residential accommodation.
From April 2020, the rules on private residence relief will be tightened limiting relief to properties where the owner is in shared occupancy with the tenant.
However, the government appears to have climbed down from its draft proposals to introduce a ‘shared occupancy test’ for rent-a-room relief.
Entrepreneurs’ Relief retained
The Chancellor revealed to the House of Commons that he had been “encouraged” to scrap Entrepreneurs’ Relief altogether prior to his Budget 2018 speech.
However, Mr Hammond has recognised the value of this relief and after lobbying from various sources, he has decided to retain it. He has opted to extend the qualifying period from 12 months to two years; a move designed to support longer-term investments in ambitious, fast-growing businesses.
IR35 to include private sector from April 2020
In the Autumn Budget 2017, the Government confirmed that, following changes to the public sector, it would consult on plans to tackle non-compliance with IR35 off-payroll working rules in the private sector.
The Chancellor revealed today that following the consultation, it “will now apply the same changes to private sector organisations”.
The announcement is likely to attract criticism throughout the contracting sector. However, Mr Hammond confirmed that “after listening carefully to representations made during the consultation” the Government would delay the roll-out of IR35 in the private sector “until April 2020”.
Business rates cut by a third for smaller retailers
Small and independent retailers with commercial premises with a rateable value of £51,000 or less will have their business rates reduced by a third during the next two years.
The Chancellor said that this will result in an annual saving of up to £8,000 per annum for up to 90% of small and independent retailers on the high street.
National Living Wage increase in April 2019
The National Living Wage (NLW) will rise by almost 5% in April 2019 from £7.83 to £8.21 per hour for employees aged 25 and over.
Bryan Sanderson, chair of the Low Pay Commission (LPC) said: “I am pleased that the Government has again accepted in full the Low Pay Commission’s recommendations for future minimum wage rates.
“The increase in the NLW in April 2019 will ensure a pay rise for the lowest-paid workers that exceeds both inflation and average earnings”.
VAT threshold frozen until April 2022
Finally, Mr Hammond has also confirmed that the current £85,000 VAT threshold will be frozen for an additional two years until April 2022.
There had been fears the threshold could be cut as much as 50% prior to Budget 2018, but the Chancellor has opted to maintain the status quo – at least until the Government has agreed the final terms of the nation’s new trading arrangement with the EU.