The Chancellor delivered his budget today and whilst the UK is the sixth largest economy in the world, the forecast for growth in 2017 has been significantly downgraded from 2% to 1.5%.
Key highlights from the budget speech that will affect UK businesses include:
- The National Living Wage (payable to workers aged 25 and over) increases by 4.4%, from £7.50 an hour to £7.83. This will give full-time workers a £600 pay increase which businesses will need to fund.
- The VAT threshold for small businesses will remain at £85,000 for the next two years but the Chancellor will consult on whether it should be changed to better incentivise growth.
- In a move to encourage greener transport, there will be increased company taxes on diesel cars (but not vans) but electric cars charged at work will not be treated as a benefit in kind.
- The switch from using the retail prices index (RPI) to the consumer prices index (CPI) in the calculation of business rates has been brought forward by two years, to April 2018. According to Mr Hammond, this will save businesses £2.3bn over the next five years.
- Following the damaging revelations in the Paradise Papers, the government is to introduce measures to tackle offshore tax evasion, including increasing taxes on royalties from UK sales where those royalties are paid to a low tax jurisdiction. However, even the Chancellor has admitted that this “won’t solve the problem” and will only raise an additional £200m.
The Chancellor also announced £3bn for Brexit planning, an extra £2.8bn for the NHS over the next three years and, in a final flourish after speaking for an hour, he abolished stamp duty for first time buyers for houses under £300,000.