At a glance, the Autumn Budget 2018 is a win for entrepreneurs and SME’s. If your personal income is less than £100,000 and you’re a ‘genuine’ entrepreneur, taxation rules and entrepreneurs’ relief remain favourable. The more indirect budget effects could also be highly beneficial.
1. Entrepreneur Relief Timeline Extended
Phillip Hammond decided to meet halfway regarding the contested £10m entrepreneurs’ relief allowance, choosing to revise rather than abolish. The change is an increased minimum holding period from one year to two prior to selling a business.
This is meant to reward ‘genuine’ entrepreneurs who recognise that establishing a successful business ready to sell takes time.
Those who build and sell a business within 24 months will no longer qualify for the tax allowance.
2. Rates slashed for independent businesses
Businesses of all sizes have generally gained.
High-street based small businesses are the biggest winners. Up to £8000 in tax savings are now available for small businesses who have a rateable value under £51,000 for the next 2 years.
The fight to protect independents from corporations like Amazon from running local enterprise out of business is additionally supported through co-funding to local councils, with Hammond committing of £675m to the transformation of streetscapes, infrastructure and transport access.
3. VAT Raid scrapped & allowances raised
Despite reports of a VAT raid on small business lowering the minimum required turnover amount required to pay VAT from £85,000 to £43,000, no such decision was officially made.
In fact, the chancellor raised the personal tax allowance from £12,500 for basic rate taxpayers and £50,000 for higher rate taxpayers in 2019.
Businesses seeking capital expenditure will also be pleased with the “Annual Investment Allowance” being substantially increased from £200,000 to £1m.
4. Digital Services Tax a win for Start-ups
Tech-based startups are likely to benefit indirectly from the digital services tax that will be placed on “established technology giants”.
Public calls for companies such as Facebook and Google to contribute to local tax and “pay their fair share towards support of public services” has encouraged Hammond to show the way to the international community.
The “UK digital services tax” introduces a 2% tax for tech companies with sales over £500m. This strategically avoids the UK startup and SME market and potentially creates an opportunity for them to gain market share.
Critics hope it has been designed in a way that doesn’t prevent home-grown tech innovation or international business investment in the UK.
5. Brexit’s Impact
The Budget 2018 cannot be evaluated without taking into consideration the broader implications of Brexit.
Hammond’s Budget aims to reduce austerity but, in the event of a no-deal Brexit, he concedes that the economic situation will continue for another 5 years.
This is a potential worry for UK-only entrepreneurs and businesses. Opportunities to take a global view is an option for relevant business owners to avoid the expected financial fallout. Others must hope that the unconfirmed but rumoured spending increase of 1.9% will come into fruition.