Chancellor Philip Hammond delivered his Autumn Budget as the UK prepares for Brexit. Downing Street later bullishly stated that spending commitments outlined in the Budget would be honoured regardless of the UK’s deal with the European Union. The Chancellor was upbeat about the state of the economy; he forecasted growth of 1.3% for 2018. He also forecasted growth of 1.6% in 2019, 1.4% in 2020, 1.4% in 2021 and 1.5% in 2022. Hammond declared that austerity was coming to an end although he did note that UK debt is still too high.
The Annual Investment Allowance (AIA) is set to be increased from £200,000 to £1,000,000 for the next two years. The AIA allows businesses to deduct the value of a qualifying item from its profits before tax. This measure has presumably been taken to incentivise businesses investing in their growth. Hammond also announced that the Employment Allowance will be limited to small businesses with employer’s National Insurance contributions (NICs) totalling less than £100,000 per year. The Employment Allowance enables businesses to get up to £3,000 off their National Insurance bill.
Hammond announced that, over the next two years, the business rates of firms with premises with rateable value of £51,000 or less will be cut by one third. This measure is projected to positively impact 90% of small high street businesses.
Individuals will benefit from the increase in the income tax personal allowance which is set to increase to £12,500 in April 2019. In announcing this Hammond has been able to deliver on a manifesto commitment a year earlier than was initially planned. The higher rate taxpayers’ threshold has also been increased from £46,351 to £50,000. Furthermore, the minimum wage is set to increase from £7.83 an hour to £8.21.
The threshold requiring businesses to register for VAT (£85,000) will remain the same until April 2022.
The government is now set to tax digital service companies 2% on the money they make from UK consumers from 2020. This tax regime will affect digital service companies with global revenue of more than £500 million – tech startups will remain unaffected by this new tax.
Finally, Hammond also announced an extra £20.5 billion for the NHS over the next few years.