It’s that time of year again. On Monday 29 October, the Chancellor of the Exchequer will give his Autumn Budget 2018 speech.
The Autumn Budget provides insight into the Government’s plans for tax and public spending during the 2019-20 financial year, and will be the last Budget before the UK officially leaves the European Union in March.
After an eight-year programme of austerity, Theresa May used her Conservative Party conference speech earlier this month to assure the public of “better days ahead”. She claimed austerity was over and vowed to boost the NHS budget by an extra £20 billion a year by 2023.
The Chancellor echoed this sentiment in a tweet, stating that his Autumn Budget speech will “set out how [his] balanced approach is getting debt falling while supporting our vital public services.”
While increased NHS funding is certainly welcome news, small businesses will be keen for confirmation on where the money will come from. So what can we expect in this year’s Budget?
Will the VAT threshold be reduced?
Philip Hammond has reportedly reviewed proposals to bring hundreds of thousands of small businesses into the UK’s VAT system.
The Chancellor is considering making changes to the current “defective” system. The existing VAT rules have been described as an impediment to growth, since companies lie or purposefully stop growing to avoid crossing the threshold. In the 2017 Budget, Hammond froze the threshold for two years from April 2018, but sources say that cuts are now on the table.
At present, businesses with a turnover of more than £85,000 are required to charge VAT. The Chancellor is said to be considering plans to halve that threshold to £43,000, in a move that would earn around £2 billion for the Exchequer - but affect more than half a million small businesses across the country.
Tax changes for contractors and freelancers
As part of last year’s Budget, Philip Hammond announced a consultation into off-payroll working in the private sector, with the aim of tackling non-compliance with IR35. The consultation concluded earlier this year, and some reports have suggested that IR35 reforms could now be extended from the public sector into the private sector.
With the freelance economy experiencing steady growth, tax reform does seem inevitable. But many will hope Hammond waits until next year to introduce any drastic changes, to ensure freelancers and contractors have the stability to weather Brexit’s economic turbulence.
Possible cuts to the dividend allowance
In the 2017 Budget, the Chancellor slashed the dividend allowance by 60%, from £5,000 to £2,000.
According to the Treasury, the allowance was cut in a bid to reduce the tax differential between the self-employed, employed and those working through a company, to raise revenue to invest in public services, and to ensure that support for investors is more effectively targeted.
The Federation of Small Businesses (FSB) have suggested that Philip Hammond may target dividends again in this year’s Budget, and abolish the dividend allowance altogether. According to the FSB, the Treasury could raise £1.3 billion per year from the abolition, in addition to the £2.6 billion raised by reducing the allowance last year.
What are you expecting from this year's Budget?
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