Chancellor Philip Hammond used his first spring budget yesterday (March 8) to announce changes to corporation tax, self-employed national insurance contributions and business rates.
Hammond began his speech by noting that the British economy has remained resilient despite the uncertainty around Brexit – something that has come as a surprise to pessimistic commentators.
He commented: “I report today on an economy that has continued to confound the commentators with robust growth. A labour market delivering record employment. And a deficit down by over two thirds.”
Hammond then went on to falls in corporation tax to 19%, as of April 2017, and 17% by 2020. This represents the lowest rates of corporation tax in the G20 – the international forum of governments and central bank governors from 20 major economies.
Hammond also unveiled three measures to alleviate the burden of business rates, including a £300m business rate relief fund for local councils.
Firstly, any business coming out of small business rate relief will benefit from a cap, which prevents rates of pay from rising by more than £50 a month. Local authorities will now be able to access a £300m ‘hardship’ fund for small businesses worst affected by the rates – allowing local authorities to react to local problems without a long-term ‘fix’ from the government.
The final measure implemented by Hammond relates to pubs with a rateable value of less than £100,000, which will get a £1,000 discount on rates. Technically, this includes 90% of pubs in England.
When taken together, the government’s business rates measures cut the total by £435m.
Despite this, critics still insist that small companies suffer unfairly compared to big companies like Amazon, which benefit from low rates on out-of-town warehouses. Hammond explained that the government would have to “find a better way of taxing the digital part of the economy”, but said that further plans would be outlined “in due course”.
In response to the budget announcement, British Retail Consortium chief executive Helen Dickinson OBE commented: “We agree with the Chancellor that the world around us is changing quickly and we need to have a business tax system that is fit for purpose in the 21st century. Any review needs to incorporate business tax in its entirety and not be constrained by the technicality of fiscal neutrality around business rates.
“We hope that the relief measures will help some of those businesses hardest hit by the revaluation, albeit only temporarily. However, more short-term relief measures continue to add complexity to an already impenetrable system. £435m is a drop in the ocean compared with the £25bn a year that the tax raises. This is yet another sticking plaster on a chronically ill patient – an unsustainable property tax, higher here than anywhere in the developed world.”
The budget also outlined plans to increase national insurance contributions for self-employed workers by 2%.