While measures around the UK’s high-tech economy and a dramatic cut to Stamp Duty Land Tax (SDLT) for first-time buyers dominated Philip Hammond’s Budget, George Hay Chartered Accountants, which has offices in Biggleswade, Letchworth and Huntingdon, has criticised the lack of support for SMEs.
Although the Chancellor shunned calls to cut the VAT threshold, choosing instead to keep it at £85,000 for the next two years, and pegged business rates to the CPI measure of inflation from 2018 rather than 2020, there was little else to give much-needed cheer to SMEs.
This was despite telling MPs that: “We can’t build an economy fit for the future without supporting its backbone: our 5.5 million small businesses who are responsible for nearly half of our private sector jobs.”
Against this background, he confirmed that he will press ahead with an increase in the National Living Wage for workers aged 25 and over from April 2018. This will see it rise by an inflation-busting 4.4 per cent from £7.50 per hour to £7.83, as part of the Government’s commitment to reach £9 by 2020.
The move will have a disproportionate impact on employment costs for SMEs, with the added burden of increased National Insurance and workplace pension contributions. At the same time, it will divert funds away from investment in business growth.
Phil Blackburn, Tax Partner at George Hay Chartered Accountants, said: “The Chancellor has failed to match his words with actions, offering little to give SMEs cheer while increasing their employment costs, well beyond the rate of inflation.”
“Increasing costs in this way, while offering nothing in return will create a real headache for many SMEs and leave them wondering whether the Government really values their contribution to the economy.”
However, in more positive news, the Chancellor announced a small number of schemes, which may offer SMEs some respite.
One of the most significant was a £500 million investment in artificial intelligence, 5G data networks and fibre broadband.
Mr Hammond also confirmed an increase in R&D Expenditure Relief from 11 to 12 per cent on qualifying expenditure, which whilst aimed at large companies, can be claimed by SME subcontractors or SMEs in receipt of R&D grants or subsidies.
“Although some of the measures announced offer a little respite to those businesses in need of it, there is still much that could be done to boost their confidence. One advantage of this Budget was the absence of widescale tax changes, meaning businesses can largely continue to plan in line with the current tax regime for at least another 18 months.” said Phil Blackburn.
Meanwhile, on Income Tax, the Chancellor announced that the personal allowance and the higher rate threshold will increase in line with inflation to £11,850 and £46,350 respectively.
The big winners, however, were first time buyers, as the Chancellor announced they will no longer have to pay Stamp Duty Land Tax (SDLT) on purchases up to £300,000 and no SDLT on the first £300,000 when purchasing homes worth up to £500,000.
For more information on George Hay Chartered Accountants, please visit: www.georgehay.co.uk