How this budget will affect businesspeople in Suffolk and Essex
PUBLISHED: 12:23 30 October 2018 | UPDATED: 10:21 31 October 2018
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From apprentices to entrepreneurs, the raft of changes in this year's budget are bound to affect people involved in all levels of business in East Anglia. Our experts in Suffolk give their reaction to Chancellor Hammond's big announcements.
Personal allowance rise
An earlier than expected increase in the income tax threshold and the higher rate threshold were the highlights of the Chancellor’s Budget.
Philip Hammond said the personal allowance, the income at which workers begin to pay tax, would increase to £12,500 from April, with the amount when the top rate of income tax is applied rising to £50,000 at the same time. They had been due to come into effect in April 2020.
Colin Low, a chartered financial planner with Kingsfleet Wealth said that these changes would affect a lot of his clients, “Many of them are high earners in that £50,000 income bracket.”
He added that he had been expecting to see cuts in pension contributions. “But no news is good news, when it comes to pensions!” he said.
Tech Innovation support
The 2018 Budget promises £1.6bn to fund “advanced technologies” such as artificial intelligence and quantum computing, £200m for rural broadband and £150m for tech fellowships, along with plans to impose a digital services tax for web giants.
According to Jon Bloor, a partner within the corporate and commercial team at Ellisons Solicitors in Ipswich, , these measures can only be a good thing for our region, with its ‘silicon corridor’ from Cambridge to Norwich of companies at the cutting edge of innovation.
“Science, technology and IP rich business are very relevant to our region. There is a lot going on to try to push and develop new technologies, which is very positive.
“But I am disappointed there were no real measures pushing specifically for East Anglian projects - it was mainly about helping the Northern Powerhouse. There is so much potential in this region, its a shame to see East Anglia left out in the cold.”
Tax relief for businesses
The annual investment allowance (AIA), a form of tax relief for British businesses that is designated for the purchase of business equipment, will rise from £200,000 to £1 million for two years. This allowance will be available from 1 January 2019 to 31 December 2020 as part of the government’s aim to ‘stimulate business investment’, Mr Hammond said.
Andrew Driver, head of taxation at Felixstowe-based Beatons Group, says this increase will “release a lot of funds to businesses concerned about Brexit.” “It will also help contribute towards productivity.
“They have frozen VAT thresholds for two years which will mean more businesses being pulled into having to charge VAT. This is fiscal drag as inflation pushes incomes up more business owners will be caught.
“We also think quite a few properties might be sold as lettings relief is withdrawn. It will hopefully encourage some people to sell homes before 2020 to benefit from the capital gains tax exemption.”
Overall, Mr Driver said he thought Mr Hammond was “very careful” with his budget. “He didn’t really veer off from what was expected.”
Capital Gains Tax relief for entrepreneurs
Mr Hammond left capital gains tax (CGT) broadly unchanged, but has tweaked rules on tax relief for entrepreneurs by extending the qualifying period of the tax break from 12 months to two years, with the aim of encouraging longer-term investment in British business.
Entrepreneurs pay a lower rate of tax at 10pc, compared to the standard rate of 20pc, on capital gains when they sell all or part of their business if more than the annual exempt amount of £11,700. The relief is claimed by around 50,000 entrepreneurs.
Mr Bloor said: “There have been rumours floating around for a while about entrepreneurs relief from capital gains tax being pulled entirely, so it’s interesting that it remains in place, and has to be a good thing for business growth.
“But the extension of the period in which you have to own the assets from 12 months to 24 months will impact some of our clients.”
Funding for Government departments’ Brexit preparations has been increased from £1.5 billion to £2 billion.
With tensions running high as the government struggles to secure a deal surrounding its exit, Maritime Cargo Processing Plc, a company which provides community systems for 17 ports across the UK, including the port of Felixstowe, has been eagerly awaiting a deal to be struck.
The company’s accountant David Copsey said: “A report last week by the National Audit Office found that of the 12 critical border systems, two were not ready and another eight will doubtful be ready in time. There is an awful lot to do to get borders ready for Brexit and its going to be a real challenge to get it done by next March.
“The increase in the investment allowance announced in the budget might help businesses get ready for Brexit.”
UK to open more e-gates following summer delays
More overseas visitors will be able to use e-passport gates at UK airports after queues at checkpoints exceeded two hours this summer.
Air passengers from the Five Eyes intelligence-sharing alliance - which in addition to the UK consists of the US, Canada, Australia and New Zealand - plus Japan will be allowed to use the gates.
E-passport gates are currently only available free of charge for travellers from the European Economic Area (EEA) and Switzerland.
A London Stansted spokesperson: “We welcome the news that passengers from more countries will be able to use e-gate technology in the future, while at the same time highlighting the need for more investment now in additional border resources and a long term plan that enables UKBF to meet the needs of passengers, particularly at airports that are continuing to growing.”
Boost for apprenticeships
The Chancellor said for smaller firms taking on apprentices, the Government will half the amount they have to contribute from 10% to 5%. He said a support for apprenticeships was worth £695 million.
The measure was in addition to reforms of the apprenticeship levy announced earlier this month following criticism from businesses and figures showing fewer new starts since it was introduced last year.
Charlotte Bate, a director of Mad HR in Ipswich, said that anything that will enhance skills and talent “will be of benefit” to businesses in Suffolk and Essex.
“The number of apprenticeships has been falling year on year, because I think that businesses see it more as a cost than an investment. They think in the short term, not the long term.
“With this reduction, although it is of benefit, I don’t think it will increase the number of people on apprenticeships. That comes down to creating more awareness and making the process itself easier.”