Philip Hammond confirmed in his first Autumn Statement that corporation tax will be reduced to 17% as planned. He also announced that he would direct £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms
He is also giving small businesses in rural areas a tax break worth up to £2,900 per year by increasing the Rural Rate Relief. The chancellor also added that the Communities Secretary Sajid Javid will announce business rates relief for other companies later today.
Hammond also announced an increase in the National Living Wage. PwC employment tax partner John Harding said, “This is positive news for working families, but the additional strain on ‘EJams’ – employers just about managing – should not be underestimated. This comes at the same time employers are facing a triple whammy of additional costs from the apprenticeship levy, holiday pay changes and pension auto-enrolment increases.
‘A tall order for smaller employers’
“The National Living Wage added 1% to the average pay bill for employees when it was introduced in April. The latest increase will be felt by more employers and at a greater cost as more employees are now at the National Living Wage level. The actual cost will vary across industries, with retailers, facilities management, care homes and the hospitality industry especially impacted.
“The smaller than expected increase raises questions about how we will reach the £9 per hour target by 2020. From moving to £7.50 per hour in April, it will then require an average 50p per year increase in the National Living wage – which could be a tall order for smaller employers.”
‘Need for stronger fiscal interventions next year’
Meanwhile, the Federation of Small Businesses (FSB) chairman Mike Cherry, said his members were pleased with the confirmation of plans to remove £6.7 billion from the business rates system, as well as the decision to make rural rate relief fairer for small firms. We welcome Government responding to our calls to increase investment in local roads and digital connectivity to help rebalance the UK economy.
“We also back the £2 billion per year boost for research, development and innovation, plans to improve management skills, the £400m to improve small business finance through the British Business Bank, and the doubling of export finance. The latter is vital as we need to reach new markets in the wake of the Brexit decision.
“But there will need to be stronger fiscal interventions to boost the economy next year, with the prospect of weaker longer-term growth looming. Small firms want to grow, export, innovate, recruit and be more productive – and they need to know as soon as possible the framework they will operate in. Today’s moves to tighten conditions for the self-employed must also be followed up with help to give them parity in benefits so that the UK’s army of genuine self-employed people will continue to grow.”
More to follow…