We are less than a week away from the Chancellor of the Exchequer, Philip Hammond giving his Autumn Budget 2018 speech, outlining the Government’s plans for tax and spending during the 2019-20 financial year. What can the UK’s small business community expect to be announced?
Firstly, it’s important to note that this Budget 2018 speech is somewhat unique to previous speeches. The date of the Budget was moved forward to avoid clashing with UK negotiations with the European Union (EU) and it is being presented on a Monday rather than a Wednesday, which has been the tradition for many a year.
However, will its content differ much to previous Budgets unveiled by Mr Hammond? This article weighs up the most likely fiscal announcements to affect UK’s small firms.
U-turn on Personal Allowance pledge
Within the Conservative Party’s most recent election manifesto, there was a commitment to making income tax cuts in the form of raising the tax-free personal allowance threshold. The Government was previously committed to increasing this to £12,500 by 2020, but there are fears this pledge could be scrapped in favour of raising funds to underpin Universal Credit.
Furthermore, the Chancellor is said to be considering a freeze on higher rate income tax thresholds at £46,351, bringing an end to the Government’s commitment to raising the higher rate threshold to £50,000 by 2020.
Fuel duty set for ninth successive freeze
Prime Minister, Theresa May has already mooted that the Government will be freezing fuel duty for a ninth successive year; a move which sees the Treasury miss out on a further £800m in revenue. However, given the current high prices for petrol and diesel at the pumps, the decision to freeze fuel duty is hardly surprising.
Overhaul of inheritance tax rules likely
Many reports suggest an overhaul of inheritance tax is probable next week. The Office for Tax Simplification was commissioned by the Government earlier in the year to review inheritance tax.
Since 1986, individuals have only been permitted to pass on £3,000 a year to loved ones. Some suggestions have been made that the Chancellor is considering simplifying the rules on gifting assets by implementing a larger annual allowance.
VAT threshold could be slashed
It has been reported that the Chancellor has reviewed proposals to incorporate hundreds of thousands of small businesses in the UK’s VAT system.
Presently, businesses with a turnover of more than £85,000 are required to charge VAT to their customers. Mr Hammond is said to be weighing up plans to cut that threshold by virtually 50% to £43,000 – a move that would earn £1.5 billion for the Exchequer, but harm more than 500,000 small firms.
Private sector freelancers could be affected by IR35
The Government consulted on plans to apply IR35 to private sector freelancers as well as public sector contractors earlier this year. It appears the Government’s preference is to incorporate private sector freelancers into IR35. However, given that the UK’s impending exit from the EU is just months away, this may be put on hold for the time being.
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