How Will the 2018 Budget Affect Your Business?
It’s fair to say 2018’s budget was one of the most important in recent years. Claims that austerity is ending left both individuals and business owners waiting with bated breath as Philip Hammond delivered the speech on 29th October.
Unfortunately, as is usually the case, the Chancellor of the Exchequer didn’t rush to get to the facts in his annual statement. Don’t worry. This post has all the key information on what’s in store for the economy, taxes and business investment over the next year, and how these announcements will affect you.
Throughout his speech, the Chancellor discussed a number of issues, from frozen duties on fuel to the increase in government spending for the NHS. He also boasted about near-record high levels of employment, set to continue with 800,000 more jobs by 2022.
Onto the budget itself, Mr Hammond announced an increase in the National Living Wage to £8.21, which will benefit 2.4 million workers. Alongside this came an announcement on changes to income tax. The personal allowance threshold is set to change in April 2019 – a year earlier than initially planned.
For basic rate tax payers, it will rise from £11,850 to £12,500, with an increase to £50,000 for higher rate payers. All in all, this means a basic rate taxpayer will pay £1,205 less tax in 2019-20 compared to 2010-11.
Annual Investment Allowance
The budget also had an emphasis on helping businesses grow. More specifically, there will be an increase in the Annual Investment Allowance (AIA) from £200,000 to £1 million. This rise will take place from 1st January 2019 to 31st December 2020.
The AIA is a tax relief for businesses when purchasing business equipment. It allows them to write off the relevant capital expenditure from their taxable income in the same period.
The budget also included new plans for business taxes, including a new digital services tax. From April 2020 digital businesses with annual UK revenues above £25 million will pay a new 2% tax on their revenues earned from UK users.
Changes are also in place for private sector contractors, who have been facing increasing difficulties with payments for work completed on an invoice basis. Under the IR35 rules, HR departments have been assessing contractors as employees and deducting PAYE tax and National Insurance Contribution (NIC).
However, these contractors don’t receive the same employment rights such as sick pay or holiday pay. In the budget, the Chancellor has extended the rules to include contracts between contractors and large and medium size private sector businesses.
In recent years Employment Allowance (EA) has been a boost for small businesses. It provides businesses and charities with £3,000 relief on NIC payments. However, in the Autumn Budget, it was announced that only employers with NIC payments of below £100,000 in the previous tax year will be eligible for EA.
The British high street is also set for a cash injection, with the Chancellor setting aside £675 million for a Future High Streets Fund. The aim is to co-fund local councils to help transform their high streets with improvements to transport and redevelopments.
The high street will also see changes to business rates. From April 2019 small retail businesses will see rates cut by a third for two years. This is specifically for businesses with a rateable value of £51,000 and under.
UWM can help
Whether it’s income tax rates or the minimum wage, changes can be confusing and complex when it comes to running your business. That’s where UWM comes in – a team of expert accountants in Leeds.
Our 2018 budget summary looks at how the budget will affect you. Alternatively, you can get in touch with our team of expert accountants, who have helped hundreds of businesses and are ready to help yours too.