Budget 2017: Hammond hands small businesses a double boost on rate rises and VAT threshold

Posted On: 
22nd November 2017

Philip Hammond's Budget has given relief to small business owners by announcing a reduction in business rate rises and keeping the VAT threshold at £85,000.

Hammond Philip Hammond speaking in today's Budget
PA Images

The Chancellor said the Treasury will bring forward changes to the way business rates are calculated by two years. 

Mr Hammond said the switch from the higher RPI to CPI would be worth £2.3bn to businesses over the next five years. 

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“We have listened to concerns about the potential costs of the annual uprating of business rates in April,” Mr Hammond said. 

“And today I will accept the representation of the British Chambers of Commerce, CBI and other business organisations and bring forward the planned switch from RPI to CPI by two years, to April 2018 - a move worth £2.3bn to businesses over the next five years.”


Reports in the run-up to the Budget had suggested the Government was looking at reducing the threshold at which small businesses start paying VAT.

However under pressure from Tory colleagues he declined to make a change, despite the Office for Tax Simplification (OTS) recommending reform.

"At £85,000 The UK’s VAT threshold is by far the highest in the OECD by contrast, in Germany it is just £15,600. I note the OTS conclusion that it distorts competition and disincentivises business growth," Mr Hammond told MPs.

"I also note the Federation of Small Businesses’ concerns about the cliff edge of the threshold. But such a high threshold also has the benefit of keeping the majority of small businesses out of VAT altogether so I am not minded to reduce the threshold. But I will consult on whether its design could better incentivise growth and in the meantime we will maintain it at its current level of £85,000 for the next two years."


Elsewhere in the Budget, Mr Hammond unveiled a major funding boost for the cash-strapped NHS - as the nation's finances were hammered by sluggish economic growth.

The Chancellor revealed the health service will receive an "exceptional" £2.8bn over the next three years to help NHS trusts make ends meet.

He also revealed that the Office for Budget Responsibility has massively downgraded its forecasts for economic growth over the next five years.

GDP is now expected to grow by 1.5% this year - down from the 2% they had forecast in March.

Economic growth is now expected to be 1.4% in 2018 (down from the 1.6% forecast), 1.3%s in 2019 (1.7%), 1.5% in 2020 (1.9%) and 1.6% in 2021 (2%).