On 29th October, Phillip Hammond introduced what he claimed to be ‘a budget for Britain’s future.’ But with Brexit looming and high-street sales plummeting, were there any points in the budget indicating that the future of small businesses is bright? This week, we examine the key points from last week’s budget and find that in fact, there are some changes that will benefit small businesses.
Entrepreneur’s Relief is staying put!
Amidst fears it would be scrapped, the chancellor explained that although there would be some additional restrictions put in place, the scheme will continue to exist. Not heard of it? In short, it is a form of tax relief that means entrepreneurs will pay just 10% tax when selling their business or its assets. It’s a brilliant scheme if you’re looking to exit, read more about it here.
Annual Investment Allowance is increasing.
Previously having had a limit of £200,000, AIA is increasing to £1 million over a course of two years. This allowance enables companies to claim tax relief on assets. 100% of the cost of your equipment may be deducted from your annual business profit. There are two ways this allowance is split; between entrepreneurs who are registered for VAT and those who are not. If in the former category, you may claim AIA on the total cost of the asset minus any VAT claimed back. If in the latter, you can deduct the asset’s total value from your profit. Discover more here.
Personal tax allowance has seen some slight changes.
If you are just starting out, and earning up to £12,500, you will now be able to enjoy it tax free. Previously at £11,850, this slight increase in cash-flow may help small-scale entrepreneurs to buy extra equipment, pay for a marketing campaign or attend a training course. Similarly, the higher tax bracket will increase to £50,000 per year. These changes will take effect in 2019.
Using property for business purposes?
As well as this, if you have a high-street shop or premises used for your company, the announced cuts in the business rates bill may help. But what is the bill? If you own a property that is used for business purposes, you must pay tax on it. The recent budget announced that businesses whose property has a value of £51,000 and under will have their bill reduced by 33% over two years. The chancellor advised that this may lead to savings of up to £8,000 for entrepreneurs. It is worth noting that the £51,000 covers just the area used for your business, so if business is conducted from just one part of a property, it is this area alone that will be valued. Similarly, if you own a high street shop, the Future High Streets Fund could help. The chancellor declared there would be £675 million injected into helping local councils to better support their high streets.
Living wage will be increasing!
Currently sitting at £7.83 per hour, the NLW will go up to £8.21 in April. This will help about 2.4 million employees in the UK, however entrepreneurs will have to plan the rise into their annual budgets.
New Plastic Tax
There are several schemes that will certainly benefit entrepreneurs. However, we’d like to end this post on a slightly different note, and one that the budget briefly touched upon. The chancellor announced a new plastic tax that will charge employers who create plastic goods that are less than 30% recycled. This was one of only two environmental measures that were discussed. As entrepreneurs, we like to think of ourselves as trailblazers. So next time, we’ll be sharing a post on what small businesses can do to help the environment. After all; ‘The Earth is what we all have in common’- Wendell Berry.’
For more information on the budget see:
- What The Budget Means For Entrepeneurs
- Autumn Budget 2018 for Small Business
- Autumn Budget for Small Business