Spring Budget response: NIC cut welcome for taxpayers, but Chancellor fails to provide lifeline for SMEs
Media statement
The Institute of Chartered Accountants of Scotland (ICAS) said today that the budget fails to provide enough support for UK businesses.
Bruce Cartwright CA, ICAS Chief Executive, said: “The Chancellor has again failed to offer enough support for small and medium sized businesses (SMEs), which make up 99.9% of UK businesses and are the life blood of the economy.
“Employment costs for UK employers are soaring, and the fact that the Chancellor hasn’t cut NICs for employers in this budget, as he has for employed and self-employed workers, places further strain on business as they face rising costs on all fronts.
“We applaud the Chancellor for supporting those on lower incomes by cutting employee’s national insurance rates by 2% across the UK as this puts money into the pockets of working people. This is worth £450 each year for someone on the average salary. We also welcome the move to cut the NIC payments for the self-employed from 8% to 6% which is worth £350 pa. The Chancellor seemed to imply that he would have liked to have gone further over the long term. We would welcome further debate about simplifying the tax system and making it more easily understood.
“However, by continuing to freeze the personal tax allowance, the government is putting more pressure on low paid workers, because as their earnings rise above the frozen threshold of £12,570, they will start to pay income tax. This might also negatively impact some pensioners, particularly those on the state pension who have other limited income, who could end up paying income tax on their pensions.
“The Chancellor was right to increase the high-income child benefit charge (HICBC) threshold to £60,000 as part of a broader reform to the scheme. This has often been seen as an unfair tax, as single parent households and households where one taxpayer has an income over £50,000 (but the other has a low income) weren’t entitled to the benefit. In comparison, households with two incomes under £50,000 were entitled. The increase announced today could have a significant and positive impact on struggling families’ finances. It’s likely there may be workers who might have turned down promotions and overtime to stay below the £50,000 earning thresholds to avoid the pain of the HICBC.
“The government has missed another opportunity today to reform the UK Apprenticeship Levy. Levy funds, which are currently paid by large employers whose pay bill is over £3m pa, are still under-utilised, and the revenue wasted. The scheme’s funding mechanism is notoriously complex. The scheme is also devolved, adding further complexity for businesses with cross-border workforces, because of different access methods to the schemes in each administration. We need a UK-wide framework to simplify the process and encourage more employers to put workers of all ages through an apprenticeship scheme. Smaller employers can benefit from the funding paid by large businesses because they only have to pay 5% of the cost – 95% is taken from the pot to assist them.
"The cuts made today to NICs will affect all UK taxpayers equally, as NICs is not devolved, but reserved to the Westminster Government. Scottish and Welsh taxpayers will therefore benefit from the measure, but they will of course still be subject to their own country's tax rates and bands, which aren’t affected by today's Budget measures. It's worth noting that the cut in NICs will not generate any additional funding known as 'Barnett consequentials’ for the Scottish budget as a standalone measure. If the Chancellor had decided to cut the rate of income tax in the rUK, then through the Block Grant Adjustment, the Scottish Government would have received additional revenue to reflect any reduction in revenues on a pro-rata basis.
“Sadly, the Chancellor has again failed to listen to our calls for increased resources for HMRC. He announced resources for debt collection, but no additional resources to improve HMRC services. Our members frequently tell us of their frustrations at the poor quality of HMRC’s digital services, combined with the long delays in calls being answered. HMRC tells us the solution is digital, but the government needs to invest in expanding the range of tasks that can be done electronically by the public and by tax agents.”
