Philip Hammond presented his 2016 Autumn Statement on Wednesday 23rd November. His speech set out both tax and economic measures the government will implement.
In this article, we summarise the key points arising from the Autumn Statement and focus on what the changes may mean for SME businesses
In Summary (general):
- The government reaffirming the objectives to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament.
- Reduction of the Money Purchase Annual Allowance.
- Confirmation of falling Corporation Tax rates to 17% from April 2020.
- Review of ways to build on research and development tax relief.
- Tax and National Insurance advantages of salary sacrifice schemes to be removed.
- Anti-avoidance measures for the VAT Flat Rate Scheme.
- Confirmation that future budgets will be in Autumn annually going forward.
In addition the Chancellor announced the following pay and welfare measures:
- National Living Wage to rise from £7.20 an hour to £7.50 from April 2017.
- Universal Credit taper rate to be cut from 65% to 63% from April 2017.
Draft legislation relating to many of these areas will be published on 5 December and some of the details may change as a result.
In summary (SME specific)
- National Living Wage set to rise by 30p – from £7.20 to £7.50 per hour from April 2017.
- £2bn per year investment R&D into technologies such as robotics and biotech.
- Growth forecasted to slow and inflation rises expected in the next two years.
- Rural Rate Relief increase set to give small business in rural areas a tax break of up to £2,900 per year.
- Developing digital infrastructure to help productivity.
- Tax-free childcare will also be of benefit to SMEs who employ self-employed and part-time workers.
Autumn Statement SME impact
Falling tax rates but increasing wages costs
Scott Sanderson, Partner at Hawsons, commented: “The proposed £2bn annual investment into R&D to help increase the country’s productivity is welcoming news for businesses, in addition with falling Corporation Tax rates to 17% by 2020. The chancellor, Philip Hammond, as expected, did announce a rise in the National Living Wage of 30p to £7.50 from April 2017, which will continue to have a significant financial impact to SMEs. We find that the main cost implication of these rises is not the uplift of the NMW/NLW, but the maintaining of pay differentials, reflective of roles, responsibilities and of course skillset.”
“There is good news for rural-based SMEs with the increase in the Rural Rate Relief. This has been increased to 100% which will allow a tax-break of up to £2,900 per year so this has been welcomed news for rural businesses. The introduction of tax-free childcare has also been greeted with general positivity as it will help those returning to work, as well as those who are self-employed and part-time workers.”
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