The Chancellor, Philip Hammond, announced the Government’s Autumn statement yesterday to a mixed reception from businesses. Both the Federation of Small Businesses and the Forum of Private Business rated the statement a 6/10. So, what has this mixed review been in response to? We’ve picked out five ‘highlights’ of this year’s announcements and gone through what they could mean for businesses.
- A ban on letting agent fees
One of the more controversial announcements of this year’s Autumn statement was the decision to ban letting agent fees for tenants. Tenants currently, on average, pay up to £223 in additional fees to landlords and letting agents when they move into private rented accommodation. This will now be illegal, a move which has angered letting agents. David Cox, the managing director of the Association of Residential Letting Agents, said: “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.” The argument is that while this measure on the face of it seems like a victory for renters, landlords argue it will force them to raise rents. Either way, this change seems set to influence both property businesses and private renters.
- Fuel duty, frozen again
Fuel duty has been frozen for the past 6 years and it was revealed that this freeze will be continued for a seventh successive year, Hammond had previously said that the rate would have to rise. The rate of 57.95p per litre has been the same since the March 2011 budget. In the words of political commentator Rowena Mason: “It is becoming quite politically impossible for a chancellor to raise fuel duty, given the annual pressure against any more rises from Tory backbenchers and the right-wing press.” The government says this could save van drivers up to £350 a year on fuel which should help businesses make savings on transportation costs.
- Corporation tax cut to 17%
Earlier this year, Theresa May told parliament that she wanted the UK to have the lowest corporation tax rate in the G20. Hammond’s announcement is certainly a step towards that, with the reduced rate now lower than the European average of 18.8%. However, it may not be as low as the proposed rate of 15% recently promised by President-elect Trump. The move has been welcomed by some, with Stewart Cook, area commercial manager for Yorkshire Bank saying, “I look after small and medium businesses: companies that make widgets, who bash metal, agriculture. They will welcome the cut in corporation tax. They can use the savings to invest.”
- Rural rate relief to be raised to 100%
Select businesses will be aware of the rural relief rates which aim to help support small businesses in rural areas. These rates apply to businesses in an area with a population of under 3,000 up to a certain value and are designed to protect essential small village amenities. The rate of tax relief had varied from 50-100% dependent on the value of the business but will now be set at a standard rate of 100%. This will mean a small group of businesses who often struggle in these areas get maximum tax relief. However, there have been concerns from other rural business owners, who don’t qualify for this tax relief, that this policy doesn’t do enough to support the rural economy as a whole. John Mortimer of the Country Land and Business Association commented, “We understand why urban projects will receive more funding and why this is important – but it should not be done at the expense of opportunities to support the rural economy and build the homes we need to sustain our rural communities.”
- Salary sacrifice schemes now taxed the same as income
Salary sacrifice schemes offer both businesses and employees a tax break. Businesses offer benefits such as gym memberships, and the payment for the benefit comes straight out of an employee’s salary. This deduction is taxed differently to income and ended up saving both employee and business money. However, their tax break status has now been revoked. They will now be treated the same as income, which means national insurance rules apply to them. For businesses, it means there is no incentive to offer extra benefits, with mobile phones, gym memberships, school fees, accommodation and white goods no longer be eligible. However, cycle to work schemes have been made exempt.
What is your reaction to this year’s Autumn statement? How do you think it will affect businesses in the UK? Let us know in the comments below.