What the 2018 Budget means for your SME
Monday afternoon, Philip Hammond delivered his third Budget as chancellor. General highlights include a rise of the income tax threshold from £11,850 to £12,500, a £675m ‘Future High Streets Fund’ introduced to help authorities transform town centres, and the message that the era of austerity is "finally coming to an end".
Phil Fleming, FSB spokesperson, calls it ‘the most small-business-friendly budget’, but what exactly does the 2018 Budget mean for SMEs? In this article, PNE Enterprise shares the parts of the budget that may impact your SME.
The Annual Investment Allowance (AIA), a tax incentive for investors, doubled to £1m. This is likely to increase business investment from large organisations, generating more businesses and providing greater opportunities for growth.
The apprenticeship levy halved to 5% for small business. SMEs must now only contribute 5% of the training costs, part of a £695 million package to support apprenticeships.
Rules on Entrepreneurs Relief, a tax break on those selling or disposing of a business sale, tightened. From 2019, entrepreneurs must own a business for two years before selling in order to qualify, up from one year. Furthermore, entrepreneurs must own shares entitling them to 5 per cent of distributable profits of the business and net assets of the company in order to qualify.
Tightening of IR35 (tax status of self-employed people) will impact self-employed individuals working for private sector companies. The changes mean that private-sector firms may perceive contractors as too high of a legal risk, which could alter the UK’s flexible workforce.
VAT registration remains unchanged at £85,000. The temptation to change this has been resisted, a positive for small businesses.
Overall, the Budget gave more than it took away from SME’s. However, it is worth noting that should a Brexit No Deal take place, a new Budget can be expected in Spring 2019.
For more information on how the Budget is likely to affect your business financially, friend of PNE Enterprise and start-up supporters Blu Sky Chartered Accountants, have put together a concise and informative piece.