When the budget is released, it’s often areas like alcohol and fuel duty that make the headlines – and this year, the commemorative Brexit 50 pence piece took the spotlight – but other areas of the budget carry more significant consequences.
Tax relief and wage increases
The good news for workers is that the personal allowance threshold, the rate at which people start paying income tax, is being increased in April 2019 from £11,850 to £12,500, a year earlier than planned. The higher rate income tax threshold, the point at which people start paying tax at 40% will rise from £46,350 to £50,000. Phillip Hammond had more good news for workers; the National Living Wage is set to increase 4.9%, from £7.83 to £8.21 an hour which at the same time as the increase in tax thresholds should put more money in workers’ pockets. This is news that may not be welcomed by stretched SMEs who will be looking at a higher wage bill and may need to reconsider resource allocation and staffing levels.
Reasons for SMEs to be cheerful
The outlook for growth looks good for SMEs; the 2018 forecast was downgraded in March, but this was attributed to the bad weather at the beginning of the year. Forecasts into 2019 and beyond show steady growth expected up to 2023, with 800,000 more jobs forecast by 2022. SMEs are also likely to welcome the reduction of the apprenticeship levy for small businesses; this may prove to be an excellent way to utilise and develop skills within a business and provide a way for young people to find a route into work.
In addition a two year window provides for an increase in the Annual Investment Allowance from £200,000 to £1 million per annum for qualifying capital expenditure.
Help for the high street
Many struggling retailers will be sighing with relief at the announcement of £900m in business rates relief; firms with a rateable value of £51,000 or less will see their rates cut by a third over the next two years. The measure is expected to cut bills by £8,000 and should benefit 90% of independent shops, pubs and restaurants. A further £650m will be invested to rejuvenate the high street in an attempt to stem the tide of shoppers migrating online.
What’s the verdict?
As ever with the budget, some people are satisfied, and others are not. There is a focus on increasing the money in the pocket of the average worker through the rise of tax thresholds and the National Living Wage. Many SMEs, particularly retailers, should benefit from the business rate relief but will need to look closely at their rateable value to ensure they benefit. For many, this budget is simply a prelude to the impact of Brexit and all eyes will be on the government to deliver a successful deal. In today’s statement, a £500m fund was allocated to Brexit preparations but the Chancellor acknowledged that the Spring statement in March 2019 may contain more significant announcements and changes after the Brexit process is due to be completed.
For any advice about how the budget will impact you or your business, please contact Sheen Stickland on 01420 83700 or visit www.sheen-stickland.co.uk.