A Budget for Small Businesses? Chancellor’s Budget Assessed
Delivered by Chancellor Philip Hammond on Monday, the 2018 Budget had some important announcements for small businesses, contractors and freelancers.
The statement was welcomed by some business figureheads, but criticised by others. In this blog post, we unpack some of the key announcements and explain how they may affect your business finances.
IR35 changes for limited company contractors
Contractors operating through limited companies could be hit by some significant changes to off-payroll working (IR35) rules in the private sector. Since April 2017, public sector organisations have been responsible for enforcing IR35 rules for their contractors.
In this Budget statement, the Chancellor announced that these rules would be extended to the private sector. This means that private sector clients will be responsible for judging a limited company contractor’s IR35 status, instead of the contractor themselves.
It could result in more contractors being caught by IR35 and having to pay higher taxes and national insurance contributions. Thankfully for small businesses, however, the new rules will only apply to large and medium-sized firms that employ more than 250 people. The smallest 1.5 million companies won’t have to implement the new rules.
The changes will be introduced in April 2020, not April 2019 as many commentators had feared.
Business rates cut
The Chancellor announced that business rates would be cut by a third for firms with a rateable value of £51,000 or less. The measure is expected to benefit 90% of independent shops, pubs and restaurants in a move designed to boost the high street.
The address the tax balance between shops and large online retailers, the Chancellor also announced a new 2% digital services tax to affect the largest technology companies from April 2020
Money for high streets
The Chancellor also unveiled a £675m Future High Streets Fund to allow councils to breathe new life into failing high streets.
Some of the money from the fund could be used to redevelop under-used retail and commercial space into residential housing.
No VAT threshold revaluation
Some commentators were concerned that the Chancellor could cut the £85,000 VAT threshold by as much as 50% to tackle the ‘cliff edge effect of VAT registration’ and raise more money for the Treasury.
In his speech, the Chancellor dismissed this idea saying that his “options are restricted by EU law”. He pledged to keep the VAT threshold unchanged for two more years until 2022.
National Living Wage increases
"The national living wage paid to workers aged 25 or over will rise from £7.83/hour to £8.21/hour next April, Chancellor Philip Hammond announced today.
The 38p increase represents a 4.9% rise, meaning the UK's lowest paid workers will see their pay rise above current levels of inflation. It amounts to an annual increase of about £690 for a full-time worker.
The Government says by 2020 it wants the national living wage to be 60% of 'median earnings' (that's an average which is the middle amount of what workers earn - ie, half of workers earn less than it and half more)." Source: Money Saving Expert. https://bit.ly/2AAPxEY
For more information on the changes and how they could affect your business, speak to a member of the team today. Call: 0808 282 0303.