By Kevin Gale
Practice Leader
Grant Thornton
DELIVERED at a time when the economy is still sailing forward, the Chancellor’s final spring Budget saw few surprises or standout winners. However, some important changes were announced which will impact local businesses here in Northamptonshire.
Positively, there were small concessions towards business rates – an area where the Chancellor has come under huge pressure in recent weeks – with funds made available to help those worst affected. Small businesses have also been given an extra year (to 2019) to keep digital tax records and send HMRC quarterly updates under the ‘Making Tax Digital’ initiative. Thankfully its introduction is still happening and adoption will be mandated.
One of the biggest areas of controversy was the changes to National Insurance payments for the self-employed. The Chancellor highlighted his concern about the growing tax gap between those in employment and those who are self-employed, or using service companies.
He sought to close that gap by increasing Class 4 National Insurance Contributions (NICs) by one per cent in 2018 and by one per cent the following year. However, a week later Mr Hammond announced a U-turn on the proposal. The NIC increase was due to raise around £2bn over the next four years which amounts to a sizeable hole in Mr Hammond’s budget.
On tax overall, there was very little change and generally, the opportunity for wholesale tax reform was missed. This is because the Chancellor doesn’t need to be radical now. However, there was some tax simplification for Research and Development and further anti-tax avoidance measures announced which should help to raise almost a billion pounds for the Treasury coffers.
However, the Chancellor made little mention of dynamic mid-sized businesses with their unique characteristics and challenges. One of the key difficulties facing companies in Northamptonshire, and the UK as a whole, is the shortage of skilled people and this urgently needs addressing or businesses will continue to struggle to recruit the talent they need to grow.
Beyond that we have Brexit looming on the horizon and an unpredictable US president promising wholesale tax reform. So why do anything substantive now? Better to enjoy the slightly improved public finances and store some cash away for a rainy day.
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