Budget 2018 – What does it mean for you?
Budget 2018 announcements
It was meant to be the Budget to ‘end austerity’. A Budget that would be honoured, whatever shape the upcoming Brexit deal might take.
At least those were the messages Prime Minister Theresa May wanted to get across. They just didn’t seem to be as enthusiastically endorsed – or endorsed at all – by Chancellor Philip Hammond in hours before he unveiled his tax and spending plans.
So who was right? Was it a Budget marked by a loosening of the purse strings? Or was the ‘end of austerity’ more a political aspiration than an economic reality?
And among all this, there’s perhaps the most important question – what does the 2018 Budget mean for you? We guide you through the most important announcements.
The announcement that affects nearly all of us – the one regarding income tax – came towards the end of the Chancellor’s speech. It was:
- The personal Income Tax allowance will rise to £12,500 and the higher rate threshold will rise to £50,000 in April 2019 – a year earlier than planned. (Also, the minimum wage will rise by 4.9% from £7.83 to £8.21.
But before saving that good news until last, the Chancellor announced a significant number of spending commitments. Some were known, others widely predicted and some a bit of a surprise. They included:
- Allocation to government departments for Brexit preparations to be increased to £2bn.
- Increasing mental health funding by more than £2bn per year by 2023-24 – including a NHS mental health crisis service, more mental health ambulances and a 24-hour mental health crisis hotline.
- £650m increase in social care funding next year.
- An extra £1bn for defence for this year and next.
- A £10m donation to the Armed Forces Covenant Fund Trust to support veterans with mental health needs.
- A £400m fund for schools to buy the ‘little extras’ they need.
- £420m being made available immediately for councils to tackle potholes.
- Air ambulance services in England to receive £10m in state funding.
- £500m for a housing infrastructure fund (now standing at £5.5bn) to provide 650,000 homes.
Some of these spending commitments were aimed squarely at businesses. Many THP clients will find these particularly welcome.
- £695m to help small firms offer high quality apprenticeships – halving the contribution to the apprenticeship levy for smaller firms from 10% to 5%.
- £675m for a future high streets fund to help councils redevelop their high streets.
- All companies with a rateable value of £51,000 or less will see business rates cut by a third.
- £1.6bn in new investment for a ‘modern industrial strategy’, and £150m for fellowships to attract the best talent.
- £1bn extra transitional funding for Universal Credit.
But where is the money going to be coming from? The Chancellor announced the following, but the jury will certainly be out on whether they’ll cover the bills.
- ‘Wasteful’ PFI contracts to be abolished.
- A Digital Services Tax. Levied on businesses that generate at least £500m sales globally. This will be applied by April 2020 after consultation and is expected to raise £400m per year.
- A Plastics Tax on packaging that contains less than 30% recyclables (excluding disposable cups).
- Rules on IR35 ‘disguised employment’ will still be extended to the private sector, but will be delayed until April 2020 and only applied to large and medium-sized businesses.
- Entrepreneur Relief will not be abolished, but the qualifying period will be extended from 12 to 24 months.
- Duty on wine and white ciders to be increased (but not beer, other ciders or spirits).
- Tobacco duty to continue to rise at inflation plus 2%.
All in all, this was presented as a ‘feel good’ Budget – one that hinted that austerity is easing, though still here for a good few years yet. Yes, the purse strings seem to be loosening but there are few extra sources of income.
The fact of the matter is that Brexit is still round the corner and until we know what kind of deal is on the table we won’t know what additional spending and measures will be needed.
So, while there was little to hit the average person or business in the pocket for now, it may be a little early to breathe a sigh of relief – something tells us that next year’s Spending Review will be a very different beast indeed.
To be delivered by whoever is Chancellor at that point!
If you’re feeling troubled by any of the budget 2018 announcements or are looking for help with your accounts give your local THP branch a call to see how we can help, with offices in Chelmsford, Cheam, Saffron Walden, Wanstead and London City.