This week saw Chancellor of the Exchequer Philip Hammond deliver the final Budget speech before the UK leaves the EU. As expected, some clear pro-business policies were set out, many of which will support SMEs to build their resilience. So, what were the highlights and how will they impact your company?
A key measure in the Budget was cutting business rates by a third to provide a funding injection for independent pubs, cafes, restaurants and retailers with a rateable value below £51,000. How much of a financial boost will this offer? It’s estimated that up to 90% of independent retailers will save money.
Although the measure has received praise, the threshold has been questioned – the Bookseller’s Association, for example, has called for further rates relief to support smaller retailers that are over the £51,000 level and claimed that the current system is “not fit for purpose.”
The Budget also saw amendments to the apprenticeship levy, meaning SMEs will only have to contribute 5% to their training – down from 10%. There is currently no concrete date in place for when this will be rolled out, but the aim is to close the UK skills gap and provide SMEs with the skilled workforce they need to survive and thrive.
The IoD fully supports the levy, with its Director General stating that the “low take-up of apprentices by small businesses has been a quandary for the Government since the levy was introduced, and employers will cheer the decision to reduce the co-investment rate for small firms.”
National Living Wage rises
Many workers across the UK will have rejoiced at hearing that the National Living Wage – the legal minimum wage for professionals over the age of 25 – will increase by 4.9% to £8.21/hour in April. Similarly, the increased income tax bands means a £130/year gain every year for anyone earning more than £12,500, while National Insurance threshold changes equate to further savings of £208. These were key proof points to Hammond’s claim that “austerity is coming to an end” with estimates claiming that the National Living Wage rise could benefit 2.4m UK workers.
There may of course be concerns for SMEs struggling with cashflow issues as the National Living Wage increase equates to £690 per employee over the age of 25. However, the spokesperson for the FSB didn’t let this put a dampener on what he described as a “brilliant budget” for SMEs. He points out that the difference between the minimum wage and the National Living Wage, alongside the other support introduced in the Budget, will ease this pain.
Annual Investment Allowance increase
In a welcome move, the Annual Investment Allowance (AIA) will increase from £200,000 to £1m for two years, starting in January 2019. The move will drastically impact the tax deductible for SMEs investing in plant and machinery, while the 400% increase will inevitably improve the long-term prospects of SMEs across the country.
HMRC regains preferred creditor status
Hammond also confirmed that from April 2020 HMRC will return to the preferred creditor list in insolvency cases. This move aims to ensure “that an extra £185m in taxes already paid each year” goes to fund the public sector. Currently, taxes aren’t always provided to HMRC when businesses go into insolvency – instead they are often used to pay off debts to other creditors.
There is a concern though that in cases of insolvency it will remove some of the security currently in place for impacted partners. There was however some fear that this change would leave the ordinary suppliers out of pocket in a lot of cases and that it’s possible employees could also see significantly smaller pots when their businesses go bust as more money goes to HMRC.
So, although there are some concerns, it seems that broadly SMEs across the UK are happy with the promises made during the Budget and we’re pleased to see more measures introduced to support business resilience.