What does the Budget mean for Business Owners?

The Chancellor had the unenviable task of steering the UK economy out of the single biggest peacetime shock the UK Economy has ever seen. He made it very clear that this is a once-in-a-generation opportunity to change the balance of the UK Economy and to shape it for the future.

A major highlight for business owners however will be something the chancellor didn’t mention today. There were fears that there may be an increase in Capital Gains Tax and Stamp Duty alongside a reduction in Entrepreneurs Relief, this did not arrive and the concerns of many business owners, potentially looking to exit in the short term, have been alleviated for now.

An extra £150bn of spending was promised. People’s eyes no doubt will turn to the funding of this considering we have seen the Government borrowing and lending at record levels due to the pandemic. How this will be funded remained largely unanswered throughout the chancellors’ hour-long speech.

A major area that is seen to be the driver of the future UK economy is the sciences and development of new technologies on UK shores. This is a key component of the Government’s agenda for the UK to become a “Science Superpower”.  The Chancellor committed to spending an extra £20bn by 2024 to achieve this. To aid this R&D tax credits will now be available on Cloud Computing and Data Storage costs, a welcome addition to an already popular relief by businesses. The chancellor has also indicated that there will be a loss of relief for conducting this R&D overseas, stating that this must be completed in the UK from April 2023, otherwise the tax credit will be lost. This will have implications for businesses outsourcing their R&D overseas as this will need to be brought onshore to retain the benefit.

The headline of this budget will undoubtedly be the rise in the National Living Wage to £9.50, an increase of 6.6%. While this gets positive coverage it must be remembered that it will have a real effect on businesses that are already struggling due to the pandemic.

The largest beneficiary from the Chancellors raft of measures today is the hospitality and leisure sectors. There was a 50% cut in business rates announced for the Leisure, Retail, and Hospitality industries which will save businesses over £1bn a year. Also benefiting the hospitality industry, a new Draught Relief was announced reducing the duty on a pint of draught beer or cider by 5%.

On the eve of COP26, it seems bold to cut air passenger duty for internal UK flights, however, this will have two outcomes, it will increase the affordability and therefore demand for flights in-between distant parts of the UK such as Exeter and Aberdeen. Secondly, it is hoped that this will further intertwine the four nations of the UK staving off the noises from the SNP regarding Scottish Independence. There was a distinct lack of climate change-related policies announced, again this is surprising given the current climate around Green Finance and the fact that just last week London was given the title of the “Green Finance Capital of the World”.

The main fear of business owners, that Capital Gains Tax would be increased, was unfounded. The Government is looking to Technology and Science to drive the future economy and is giving incentives for this to happen. The requirement for all R&D to be conducted in the UK from 2023 may prove to be poorly judged in the future. The Retail, Leisure, and Hospitality sectors were the big winners on the day, given these were the hardest hit industries by COVID this can’t be seen as a surprise. While the Chancellor undoubtedly has his work cut out in rebuilding the economy after COVID, if these policies announced are honoured and the UK is truly “Levelled up”, we can hope to see greater prosperity for British Businesses, and their owners, in the future.