How The New Budget Will Affect SMEs





Announced earlier this month, the new budget detailed many positive changes that will be effect businesses of various sizes. The Autumn budget seems to favour small to medium-sized businesses after the preceding budget was seen as an attack on these smaller firms due to huge increases in business taxes, however, this revised budget aims to cater to business owners who were previously left disappointed.

Chancellor Phillip Hammond announced a reduction in business rates by declaring rates will now be charged by the Consumer Prices Index rather than Retail Prices Index. This switch in inflation measures was prematurely welcomed 2 years earlier than initially planned and are expected to save around £2.3 billion for businesses over the next 5 years. Furthermore, the ‘staircase tax’ has been abolished which saw businesses in communal office blocks having to pay tax per room and these bills were backdated to 2015, costing smaller businesses thousands of pounds.

Moreover, the Chancellor has also announced that revaluation periods for businesses are to be shortened from every 7 years to 3 years. This means business rates will be more realistic and aligned with current rental values. Although smaller businesses will be celebrating, it will mean more challenges for the Valuation Office Agency to keep up with issuing these valuations and preparing data for the revaluation.

Despite Brexit causing reported uncertainty with the economy, a survey showed around one-third of small and medium enterprises were in the growth stage. This is a good indication that the UK’s small business market will thrive outside of the European Union. Additionally, with the savings from the reduction in taxes and abolishment of ‘staircase tax’ there is more room for investment in research and development to expand a business.

To further this positive growth, the budget also announced an Enterprise Investment Scheme to help bolster this growth within the small-medium business market. This entails a 30% income tax relief to encourage investment for more high-risk ventures like small-medium businesses trying to make their mark. This is most likely in a bid to bolster the UK business economy to ensure we continue to grow beyond Brexit.

Also announced in the new budget were changes to the living and minimum wage. The new national living wage is set to increase from £7.50 per hour to £7.83 for those aged 25 years and older. Additionally, the minimum wage has also increased for all other age brackets and apprentices alike. This is a fantastic news for workers, however, it does mean that businesses will need to ensure their financial forecasts reflect the recent changes for April 2018 and they have effective revenue planning in place to ensure they are preforming at optimal measures to ensure they can accommodate all these new changes.

With all these changes taking place next April, it is important that businesses are prepared financially. Although there will be substantial savings encouraging investment back into businesses, there may well be plenty of paperwork to prepare before April 2018. 

Comments