The Chancellor Philip Hammond has delivered his Autumn Budget. His message was focused on building an economy fit for the future and giving the next generation more opportunities. Investing in technological advances and furthering skills to help face the challenges ahead. The Chancellor pointed out that this can't be achieved without supporting its backbone - ‘5.5 million small businesses who are responsible for nearly half of our private sector jobs, providing vibrancy and resilience’.

VAT Threshold

The Chancellor commented on the UK having one of the highest VAT registration thresholds, which the OTS suggest could discourage competition and growth. However, he recognised the contribution small businesses make to the economy and the pressures many are currently facing. As a result, the VAT registration threshold will remain fixed at £85,000 for the next two years (from April 2018) but this may be reviewed at a later date.

IR35

Perhaps one major surprise from the budget was IR35 or the lack of it in the Chancellor’s speech. Following on from the IR35 changes to the public sector in the Spring budget, it was anticipated rolling these changes out to the private sector might have been mentioned this time. Whilst missing from the speech, the government has committed to a ‘careful consultation’ on how to tackle non-compliance in the private sector, with no time frame currently outlined.

Our CEO Luke Desmond commented, “big business in the private sector is going to provide a much stronger fight than the public sector bodies could so I am still hopeful government won’t get an easy time rolling this out.”

You can read Luke’s full take on these IR35 proposals here https://www.linkedin.com/pulse/ir35-private-sector-budget-2017-luke-desmond/

Tax-Free Dividend Allowance

It looks like the already mentioned plans to reduce the tax-free dividend allowance from £5,000 to £2,000 from April 2018 will still go ahead.

Other Announcements

The Economy

• The growth forecast for 2017 has been downgraded from 2% to 1.5%
• Productivity has also been revised down
• Another 600,000 people are forecast to be in work by 2022
• GDP has been revised to 1.4%, 1.3% and 1.5% in subsequent years before rising to 1.6% in 2021-22
• A further £3bn to be set aside over the next two years in preparation for the UK leaving the EU
• Annual borrowing £49bn this year, £8.4bn lower than forecast in March
• Debt will peak at 86.5% GDP this year, then fall in subsequent years, reaching 79.1% in 2022-23

Business Taxes

• The phased reduction of Corporation tax is still on track, from the current 19% (April 2017) to 17% by 2020
• Research and development expenditure tax credits increase to 12% (1 January 2018)
• £30m to develop digital skills distance learning courses
• £540m to support the growth of electric cars, including more charging points
• Charging an employee’s private electric cars at work will no longer be treated as a benefit in kind

Personal

• Tax-free personal allowance will increase to £11,850 in April 2018 (£11,500 in April 2017)
• Higher rate tax threshold will increase to £46,350 from April 2018 (£45,00 in April 2017)
• By April 2019 HMRC are working with the student loan company to update their process and data sharing to reduce the number of borrowers who end up making overpayments once their student loan has been fully repaid
• The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000
• National Living Wage will increase to £7.83/hour from April 2018 (£7.50 April 2017)
• Abolishing stamp duty land tax (SDLT) on homes under £300,000 for first-time buyers from 22 November
• Universal credits will see the 7-day waiting period removed and access to advances made easier and quicker
• Fuel duty was frozen
• New railcard introduced for those aged between 26-30, giving a third off

With the aim to look forward, not backward and build a Britain fit for the future, again the Chancellor has provided a rather bland budget. Perhaps a blessing for contractors after the media had predicted a far worse budget than actually materialised following the attacks we have seen on this industry over the last few budgets, particularly IR35 public sector and Flat rate scheme VAT changes we saw in April 17.