Chancellor of the Exchequer Philip Hammond delivered his Autumn 2016 Autumn Statement, and we’ve collected everything that concerns entrepreneurs and small business owners so you can easily see how it will affect you and your business.
VAT Flat Rate scheme increase
The changes that will have the biggest effect on entrepreneurs are the amendments to the VAT Flat Rate scheme.
The government will introduce a new 16.5% VAT Flat Rate scheme from April 2017 for ‘labour-only’ businesses.
This will affect ‘limited cost traders’, or businesses with a low cost base. For example, IT contractors, hairdressers, consultants and accountancy firms will be amongst those affected.
While this will reduce the benefit of the Flat Rate Scheme for many contractors, it will be more effective than not being part of the scheme.
Hammond announced “Corporation Tax will fall to 17% by far the lowest rate of overall corporate tax in the G20”. The plan for Corporation Tax to be reduced to 17% was set out by George Osborne in March.
Along with this, he also announced a plan to increase the Personal Allowance to £12,500 by 2020. The tax-free allowance will be raised to £11,500 in 2017.
Public Sector IR35
Proposed plans for IR35 were suggested in July this year, and the Autumn Statement saw their go ahead. The government plans to shift liability from the contractor to the engager (for example that may be a government department, agency or consultancy working for the public sector). It is likely this will be extended to the private sector in the future.
This could prove problematic for entrepreneurs and micro businesses as engagers instead work with larger businesses so they aren’t putting themselves at risk.
Hammond announced that he is “doubling UK Export Finance capacity to make it easier for British businesses to export”.
The government will invest 1 to 1.2% of GDP on economic infrastructure, compared to the current 0.8% of GDP.
This process will include increasing capacity for support in individual markets by up to 100% and increasing the number or pre-approved local currencies in which UK Export Finance can offer support (from ten to 40).
Protection for UK tech start ups
Hammond announced steps to stop UK tech start ups from being bought.
He said: “I am taking a first step to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale by injecting an additional 400 million pounds into venture capital funds through the British Business Bank, unlocking 1 billion pounds of new finance for growing firms.”
£23bn productivity fund
£23bn National Productivity Investment Fund will back new infrastructure and innovation in the next five years.
Transport, digital communications, research and development and housing will be the main focus for the fund, with £390m invested on future transport technology such as driverless cars.
New penalty for use of tax avoidance scheme
Hammond announced the introduction of a new penalty for use of a tax avoidance scheme. There will be a change to the tax treatment of past business losses to ensure firms always pay tax in the years that they make profits.
This is expected to raise £5bn.
There are plans to boost the development of a new ultra-fast “full-fibre” broadband, which will benefit homes and businesses alike.
Overall, there will be more than £1bn invested into digital infrastructure.
Goodbye Autumn Statement
In the Chancellor’s first Autumn Statement as he announced that this would be also be his last. Instead there will be annual budgets in autumn from 2017 and spring fiscal statements.
Want to find out more about this year’s Autumn Statement? You can read the whole thing here.
Want to learn more?
Subscribe to our newsletter to get accounting tips like this right to your inbox
About The Author
Serial snacker, compulsive cocktail sipper and full time wordsmith with a penchant for alliteration, all things marketing and pineapple on pizza.