Last month, chancellor Philip Hammond delivered the most highly-anticipated autumn statement in recent years, with the government reporting on its post-EU referendum finances for the first time. But putting politics aside, what do the chancellor’s announcements mean for small UK businesses?
Here, we provide key takeaways and announcements from the 2016 autumn statement, and discuss how these budgetary revelations could impact businesses.
Ahead of Hammond’s maiden autumn statement, there were hopes that this budget update would add clarity to a number of ambiguities in the government’s future climate and energy policies.
However, the Treasury’s latest finance update provided relatively scant information on energy policy reforms, with the chancellor choosing to focus on the financial repercussions of the EU referendum.
There were, however, some energy-related announcements which could impact businesses in the long term, and we’ve provided information on these below.
In its latest finance statement, the government confirmed it would maintain the current cap on the carbon price floor (CPF).
Some parties had speculated that the CPF could be scrapped ahead of the autumn statement, owing to its unpopularity among energy-intensive industries since it was first implemented in 2013.
In 2015, then-chancellor George Osborne allayed fears that the CPF would continue to rise by introducing a cap of £18 per tonne of CO2, a limit which would remain in place until 2019/20. Philip Hammond honoured the cap introduced by his predecessor, but questions remain about what the carbon price will be after the current price floor has expired in 2020.
It was hoped that the 2016 autumn statement would set out plans for the future of the carbon price floor, but the long-term direction of the levy remains unclear, with the government stating that it will consider “the appropriate mechanism for determining the carbon price in the 2020s.”
The CPF wasn’t the only source of speculation leading into this year’s autumn statement. Questions had been raised about the long-term future of the Levy Control Framework (LCF), which monitors and controls the cost of levy-funded energy efficiency schemes imposed by the government.
Currently, the LCF has a spending cap of £7.6 billion, which will remain in place until 2020/21. LCF subsidies allow for greater investment in the generation of low-carbon energy.
Hammond’s recent Budget refrained from making any concrete announcements about the long-term future of the LCF, only to say that the allotted cap will remain in place until 2020/21. The government has promised to set out its plans for the future of the LCF in its 2017 Budget, however.
The autumn statement 2016 wasn’t without its good news, with the chancellor announcing a £23 billion National Productivity Investment Fund aimed at improving transport, digital communications, and research and development.
One of the key areas targeted for the new funding is transport, improved infrastructure and the introduction of low-emissions vehicles. This move towards a smart energy system in the field of transport and digital communications will likely deliver savings to businesses and individuals in the future, though it’s not yet clear how and where the increased monetary funding will be used.
According to Hammond, the government will invest £390 million into the development of low-emissions vehicles, as well and renewable fuels.
While major changes to business costs and subsidies are traditionally published in the main spring Budget in March, the autumn statement did contain a few overhead changes that businesses should be aware of, and we’ve listed these below.
Salary sacrifice schemes have grown in popularity during recent years, with a number of new programmes emerging which provide tax-saving benefits for employees. However, from April 2017, all tax and NI advantages associated with these schemes will be scrapped under new government guidelines — except for schemes relating to childcare, low-emission cars, pensions and Cycle to Work.
However, arrangements put in place before April 2017 will be protected for another year, meaning that individuals will receive the same tax benefits for a further 12 months. For accommodation, vehicle and schooling arrangements, individual schemes will be protected until April 2021.
With the living wage expected to rise to £7.64 next year, it was surprising to learn that the government plan to increase it from £7.20 to £7.50 in April 2017. The figure was recommended by the Low Pay Commission, and is 14p lower than expected due to a fall in average wages.
The autumn statement introduced a number of small changes to UK business rates, including the doubling of rural rate relief to 100% from April 2017. Hammond also announced the government’s commitment to reducing business rates by £6.7 billion over the next five years.
Hammond announced that £1 billion has been set aside to boost the UK’s broadband capacity, which is great news for small businesses operating in rural areas or those currently living without access to high-speed internet.
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