Pre-Brexit Budget 2018: Getting down to business
The Chancellor has delivered a business-friendly Budget with the future firmly in his sights.
3 min read
As we come to the end of Coutts Entrepreneur Month, we look at the measures announced which support up-and-coming businesses. We also cover what the Budget means for you when it comes to property, pensions and tax allowances.
Getting started in business
We know that many of our clients come from families of serial entrepreneurs, and the Chancellor announced a number of measures designed to help new businesses get going.
The reduction of business rates for small independent retailers – with a rateable value of £51,000 or less – could boost opportunities for young entrepreneurs while helping revitalise the high street. Whether it’s an independent bookshop, a specialist food shop or a hip new boutique, this aims to add life to town centres by encouraging the next generation of retail tycoons. However, this reduction will only be in place for two years.
Entrepreneurs’ Relief helps to reduce Capital Gains Tax on the first £10 million of gain when selling a business. This has broadly been available for some time to directors or employees of an unquoted trading company who hold 5% of the shares.
While leaving the incentive in place, the Chancellor took the opportunity in the latest Budget to focus the relief on genuine entrepreneurship by adding two further conditions:
- Investors will need not only to own 5% of the company’s shares but also the distributable profits and net assets of the company
- From 6 April 2019, the minimum period that they will need to have held the shares – and that the company will need to have been trading – will rise to two years from one
There are a number of additional announcements of smaller schemes designed to help entrepreneurs, focussed on regional development, mentoring and businesses in key industries. These will all help the next generation of entrepreneurs in your family build businesses with the potential for growth.
Another measure worth noting involves the off-payroll working rules – known as IR35. Following previous reform in the public sector, the Chancellor announced that these changes will now also be rolled out to large and medium businesses in the private sector from April 2020.
The economy and property
As well as the immediate issues of personal finance, the Budget gives chancellors the opportunity to boost the economy, which can benefit investors. This year, the Chancellor was fairly short on substantial economic announcements, perhaps keeping his powder dry in the face of Brexit. As a consequence markets didn’t react strongly.
One measure that could see some benefit for the commercial property sector is business rates relief for small retailers. We’ve seen solid gains of around 3% from our property holdings this year, but returns have come mostly from offices and warehouses, with the retail sector more subdued.
While the new measures are unlikely to lead to a massive surge in retail property values, it could be a sign that this sector is set to make a bigger contribution to commercial property returns in future as the government moves to level the playing field between internet retailers and the high street. The announcement of the Digital Services Tax could be another step along this path, although it remains to be seen what form this will take.
Look out for our latest analysis of high-end property trends in London in the next edition of the Coutts London Prime Property Index, published next week. In the meantime, our previous edition looks at the longer term trends and top locations for a UK holiday home.
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There were a number of measures in the 2018 Budget aimed squarely at benefitting entrepreneurs. Reduced business rates for small independent retailers and a focus on regional development were among the business-backing moves. The Chancellor also left pensions and individual savings account levels unchanged, keeping these as the key planks for preserving the long-term wealth of your family.
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