A budget to benefit who?
Having spent the day at a Spa whilst the budget was on, I was keen when I returned home last night to find out what I had missed. I listened to the news on Radio 2 on the drive home – nothing mentioned. I went onto the BBC website and had to search for the Budget summary. Other news articles relating to the Bake Off Winner (spoiler alert for me) and Strictly had higher viewing figures, in fact nothing in the top ten most read articles related to the Budget. On this basis I immediately assumed that there could not have been anything of real excitement to note and having now read the budget summary, my conclusion remains the same.
Whilst the increases in the personal and higher rate allowance may be welcome by many, I found the increase in the higher rate disproportionate. Effectively this means those that earn a little more will be much better off than those lower earners who surely are more likely to need financial assistance. For example someone earning £50k will pay £860 less tax in 2019 than 2018, compared to someone earning £25k who will be paying £130 less, half the salary but not half the tax benefit?
Next thing to be considered is the increase in the national living wage (NLW) by 4.9%, good news but what is the real impact of this on the larger picture. Someone working 35 hours will receive a gross increase of £692 per annum but with the changes in tax and the increase in pensions next year will only see £401 in their pay packet. However let’s consider the businesses that pay these salaries – examples include care companies, restaurants, pubs and retailers. What this means is that the cost for a business for every employee paid the NLW will increase by £808 per annum. Businesses will need to increase their sale prices to ensure that their profits are maintained which means that the meal which cost you £40 is now likely to cost you £45, the cinema tickets that were £12 may become £13 – overall it won’t take long for the extra £401 income for lower earners to become a deficit.
Whilst there are business rate reductions of a 1/3 for those with a rateable value of £51k or less, which will benefit many independent shops (not many of those about), pubs and restaurants and £650m being invested to rejuvenate the high street (a little too late to save what has already for many towns been destroyed). The big question is will these reductions compensate for the additional labour costs that will be incurred instead. This feels like smoke and mirrors with lots of positive talk but little chance for it actually to be put into practice. On the bright side however, I notice that there will be some sort of 100% mandatory rates relief given to businesses who make their toilets available for Public Use. An incentive to help mainly restaurants share their facilities however surely this will take away from the ambiance of the place and therefore effect the footfall (one of the many nonsense policy changes that seem to have been brought in).
There are other changes including the increase of the annual investment allowance for Companies from £200k to £1m for a period of 2 years which will be welcome for those wishing to invest in infrastructure and equipment, most of the other changes are minor in the scale of it. As a brucie bonus we will at least be will to obtain a commemorative 50p coin to celebrate Brexit!
At this point I would usually console myself with a glass of wine, but as this seems to be one of the only alcoholic drinks to receive an increase in duty, I will have to make do with a large glass of gin and tonic instead.
If you have any questions regarding the Autumn 2018 Budget then please call your local Lambert Chapman contact on 01376 326266.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.