EY’s experts examine the Spring Budget
After Philip Hammond’s first Spring Budget, experts of the leading professional services firm, EY, give their take on everything from beer to Business Rates Relief to driverless cars.
The firm applauded the Government’s decision to invest in 5g technology, and welcomed news Sadiq Khan will be able take greater decisions, rather than waiting for central government. On self employment National Insurance increase, EY warned this could prove problematic. The firm gave a withering assessment of the decision to cut the dividend allowance, saying it would be a “bitter blow” to some. On Business Rates Relief, EY said businesses had been left “empty handed”. Social care, the firm believes, needs fundamental reform and the additional funding announced will not be enough.
5G to drive driverless cars
Stuart Orr, Advisory Partner at EY, comments on investment in 5G technology:
“The investment in 5G mobile technology is an important step to ushering in speeds that are up to 12 times faster than 4G, with the key benefit being the reduction of latency times or lag on the network. If driverless vehicles are to become ubiquitous they require high speed networks coupled with very low latency to allow key decisions and actions to be rapidly taken, so this news will be cheered by investors in that technology. It is also important to remember that for 5G to be a real success key players from across the industry will need to collaborate closely together.”
London gets ready for a global future
Caroline Artis, EY’s Managing Partner, London, comments on business rates relief:
“The Spring budget brought the welcome news that the Mayor of London is to get greater powers enabling local decision making in several areas. A wide range of London businesses will be delighted if issues like congestion and funding infrastructure can be addressed by the GLA and London Councils, rather than the central Government.
“Equally the exploration of further devolution of business rates, apprenticeships and health and social care should all be welcomed. Londoners will expect to see huge improvements in roads, rail and the Underground which will help keep London focused on a global future outside the EU.”
“NIC-ked”
David Kilshaw, Private Client Services Partner at EY, comments on the NIC increase to the self-employed:
“For those with profits above £16,250 this will be more than a NIC – this is a deep cut – with Class 4 NICs due to raise to 11% by April 2019.”
Dividend Allowance cut targeted at owner managers but hits those with share portfolios
Chris Sanger, head of tax, EY, comments on cuts to the dividend allowance:
“The Chancellor took an axe to one of the core allowances of his predecessor, something that has been in effect for less than a year. The Dividend Allowance of £5,000 was announced by George Osborne in his Summer Budget in 2015 with the express intention to apply to ‘those who either pay themselves in dividends or have large shareholdings worth typically over £140,000 will pay more tax’.
“The Chancellor cut this to just £2,000, meaning that those who have just more than £50,000 in shares will now be caught up by a tax rise that is ostensibly targeted at owner managers.
“The cut in allowance will mean that a higher rate taxpayer receiving £5,000 of dividend income will now face almost £1,000 in extra tax. This will be a bitter blow for those who are relying on these savings to fund their retirement but who now find themselves as ‘collateral damage’.”
Cheers to Hammond on Business Rates Relief
Caroline Artis, EY’s Managing Partner, London, comments on business rates relief:
“The only London businesses that will be celebrating today’s budget are the Pubs and those previously exempt. Small businesses who formerly benefitted from small business rate relief will have no more than £30 a month increase and London Pubs will get £1000 a year. Otherwise London businesses were left empty handed and disappointed, especially those competing against digital competition who once again appeared to have dodged the bullet of a business rates equivalent for online businesses.”
Additional funding for social care will provide a breather but fundamental reform is needed
Helen Sunderland, Social Care Lead at EY, comments on funding for social care:
“The £2bn additional social care funding will be a welcome reprieve for the sector helping to address the immediate social care sustainability challenge.
“However with an ageing population, more fundamental reform of both the way in which care for the elderly is delivered and funded is required to prevent longer term financial issues.
“The green paper on funding reform and the additional capital allocations for Sustainability and Transformation Plans (STPs) should go some way to address this. However, critical to this is the way in which local areas come together to improve services for their residents. The green paper reforms will need to be consistent with the ambition for health and social care integration to prevent new, or exacerbate existing administrative barriers to improving patient care.”
Find more of EY’s analysis of key measures here: http://www.ey.com/uk/en/services/tax/budget
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