Autumn Statement break down

Posted on 23/11/2016 · Posted in Blog, Food and Drink

In the first Autumn statement since Brexit, and his first as Chancellor, Phillip Hammond has announced a raft of new policies that will affect British businesses operating in the Food & Drink industry.

George Osborne’s headline tax cuts (for example reducing Corporation Tax and increasing the threshold at which individuals are taxed throughout the life of this Parliament) have been kept but the big change is that the Government will increase borrowing by £122bn cumulatively by 2020/21, rescinding on the commitment to secure a surplus by 2020.

With borrowing up and a weak pound (since January 2016, sterling has declined 15% against the dollar) fueling inflation, interest rates may start rising over the next few years.

The sugar tax went unmentioned, suggesting that the Government’s plan to bring this into law in 2018 remains unchanged. More can be read on this here 

Business Taxes and Payroll

  • Sticking with George Osborne’s plans to reduce Corporation Tax to 17% by 2020. From April 2017, the current rate of 20% will reduce incrementally. This will reduce the tax rate paid by businesses on profits, increasing cash available for dividends. However, Donald Trump as proposed cutting Corporation Tax rates to 15%, making America’s lower.
  • Alignment of employer and employee National Insurance thresholds at £157 per week from April 2017. There will be no cost to employees, and the maximum cost to business will be an annual £7.18 per employee.
  • National minimum wage will rise by 30p an hour from £7.20 to £7.50 from April 2017, impacting payroll costs.
  • From April 2017 employers and employees who use benefits in kind schemes will pay the same tax as everyone else. But there will be exceptions, including for childcare and cycling. This could apply upward pressure to salaries as employees miss out on tax break.
  • £1.3bn for ‘making tax digital’ by 2020, allowing small and mid-size companies to complete their taxes easily and efficiently online.
  • Insurance premium will rise from 10% currently, to 12% from next June.

Personal Taxes

  • From April 2017, a rise in the tax-free personal allowance threshold to £11,500 from £11,000. Will rise to £12,500 by 2020.
  • Higher rate income tax threshold to increase from £43,000 to £50,000 by 2020
  • Freeze in fuel duty, which was due to go up by 2p, saving the average car driver £130 a year and average van driver £350 a year.
  • Softening of proposed £3.4bn cuts to Universal Credit ‘work allowances’, allowing middle-class families to keep an extra 2p for every pound they earn. Taper rate to be cut from 65% to 63% from April 2017.

Public Investment

  • Extra £2bn allocated to investment in R&D per year by 2020 to plug the shortfall in scientific funding and research caused by Brexit.
  • More than £23bn of spending on innovation and infrastructure over the next five years for new National Productivity Investment Fund
    • £1.1bn on local transport network schemes and £200m to ease pressure on ‘pinch points’
    • £110m funding for East-West rail between Oxford and Cambridge
    • This should stimulate the economy and help in boosting productivity (currently Germany’s productivity is 20% higher)
    • Committing more than 1% of GDP to infrastructure and innovation after 2020
  • £1bn pot for digital infrastructure – ‘full fibre’ broadband and development of 5G
    • Will boost UK productivity with high-speed internet and less failures
    • From April, 100% business rate relief for new fibre infrastructure

Business

  • Doubling of UK export funding capacity. This facility helps British businesses win export contracts by providing attractive financing terms to their buyers, provides working capital loans and insures against buyer default. More can be found out here
  • Launch an industrial strategy to spread economic growth and a small business initiative looking at how more innovators can get a break in the face of reduced EU funding. £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms