Now the dust has settled on the chancellor Philip Hammond’s 2017 budget, reaction is starting to emerge from the winners and the losers.
After an outcry over the proposed increase in business rates, the chancellor announced measures to smooth the transition for those businesses affected by the sharp hikes in areas with high property prices.
There were also small boosts for the NHS, with an extra £120m for A&E and an additional £2b for adult social care.
Unfortunately for many of our clients at Great Annual Savings Group, the country’s SMEs were arguably losers in this year’s budget, as was the renewables sector.
How will this affect SMEs?
The affect of the budget on smaller enterprises can be neatly summarised by yesterday’s poignant Guardian headline: “SMEs are the ‘biggest losers’ in budget 2017.” (Guardian.co.uk, 8 March 2017)
Self employed people have arguably been hit the hardest, with their National Insurance Contributions (NICS) being increased by 2 per cent over the next two years. Plus, the tax allowance on dividends for shareholders has been reduced from £5,000 to £2,000.
The idea of the change is to reduce the impact of small business owners paying themselves minimum wage and declaring any further earnings as dividends to reduce the tax they’ll pay.
There has been some respite over the nightmare scenario many southern businesses based in high-value property areas regarding their business rates, though. We blogged about the proposed changes last month, which resulted in uproar from large portions of the business communities and led to an open letter being sent to the government on behalf of 13 business groups around the company.
The measures the chancellor will introduce in an attempt to ease businesses into the changes include:
- £300m for councils around the country to use to help those businesses who will be impacted the most.
- A £1,000 discount for 90 per cent of the country’s pubs.
- Any business exiting rate relief will have their increase capped at £50 per month, reducing the immediacy of the rate change.
Overall, this has shaved £435m off the overall money the government will make from business rate reform.
Publicans won’t have it all their own way, however, after a rise on beer, wine spirit and cider duty was announced in line with the retail price inflation index. This price rise will likely be passed on to consumers.
Companies who have proactively managed their energy usage by installing renewables have also had a blow.
The solar industry has taken yet another beating as the government’s support for carbon reduction continues to dwindle. The Solar Tax hike proposed last year didn’t get a mention in Philip Hammond’s speech, meaning it will go ahead as planned.
There is concern that the solar tax could prevent future investment in renewables as those who have responsibly tackled their emissions get their fingers burned.
The tax is linked to the business rates increase because sites that can generate their own electricity are considered more valuable. The hikes will be different for every business building, but can be as high as an eye-watering 800 per cent rise. By not mentioning it in his speech, the chancellor has guaranteed that the backlash will continue.
Are you concerned about how the budget will affect your business’ bottom line? Looking for extra cash to offset your increased bills? We can help you save time and money at Great Annual Savings. Get in touch for a no-obligation chat around where you could save.