Today the Chancellor announced his budget for 2018. The budget is where he sets out the government’s plans for taxes and spending for the coming year. In this blog, we’ll set out some of the changes that are coming and how they might affect you.
First, the bad news – the government’s Office of Budget Responsibility is predicting that economic growth will be lower than expected over the next few years. This could prove to be a significant concern as lower growth means businesses making less money. Much of this is down to the impact of Brexit. However, both inflation and government debt are also predicted to fall.
The Chancellor focused a lot on transport and infrastructure in this budget. He announced a range of tax changes for vehicles. In particular, the electric on electric vehicles charged at work will no longer be classified as a benefit in kind and fuel duty will be frozen. New diesel drivers registered after April 2018 will be hit with the VED rate going up one band for any diesel car that doesn’t meet the newest standards (but this won’t affect vans). The diesel supplement part of company car tax will also be increasing. Therefore if you are thinking of buying a new car, maybe avoid a diesel one.
If you do any research and development, the tax credits will be increasing to 12%.
There will be more funding for a National Retraining Scheme to improve digital skills through distance learning courses. This may prove useful for business owners to take advantage of. There will also be more money for local communities in city deals. The Northern Powerhouse will benefit, including several improvements to infrastructure in the North East such as the Tyne Metro trains.
If you have employees, please note that the Living Wage rate will rise to £7.83 in April 2018. There will also be an increase in the personal tax allowance which will rise to £11,850 for basic rate taxpayers and £46,350 for higher rate taxpayers. This change in the personal tax allowances means you can earn a little more before paying any tax. To see how the tax changes might affect you, check out the Which Magazine’s Calculator.
While duties on alcohol (except cheap high strength ones) and air passenger duty will be frozen, there will be an increase in tobacco taxes. Previously the government has announced that corporation tax will fall to 17% by 2020 and this plan has not changed, so you can expect a fall in your business tax rates over the next few years.
Young people will benefit with the introduction of a new 26-30’s railcard saving them a third on rail fares. And first time home buyers will no longer have to pay stamp duty on houses up to £300,000, but this could be canceled out by an increase in house prices. If you’ve graduated since 2012, you’ll now be able to earn £25,000 before having to make student loan repayments.
There have been several changes to VAT, but the key thing to note is that the VAT threshold will remain at £85,000 for the next two years. It is being reviewed so there may be big changes in the future. The government has decided to crack down on online VAT fraud, by making both sellers and the online marketplaces they use, liable for VAT. But as long as you are paying any VAT you owe, this shouldn’t affect you.
Business rates will now be valued every 3 years instead of every 5 years. Also, the increases will be based on the CPI inflation rate rather than the RPI rate from April 2018 (which should mean the increase is lower). This will help if you have a property you pay business rates on.
A final key point to know is an announcement in the previous budget that will affect you as a Director. The tax-free dividend allowance is being reduced from £5000 to £2000 in April. Currently, you can take a lower salary and top this up by paying yourself dividends. This will now be less of a tax advantage. We’ll be reviewing this situation for all our customers to ensure you’re clear about whether the change will affect you.
There was also a package of £44bn to encourage more housebuilding. A change is also being made to allow councils to charge a 100% premium on empty properties. The NHS will be getting some more funding and nurses will enjoy a pay rise.
Overall, the changes in the budget are fairly small. We don’t foresee much of an impact on franchises and small businesses, except for the dividend allowance changes.
Please note that it is likely that further details will emerge over the coming few days and this blog will be updated to reflect those changes.