What does the Budget mean for SMEs?

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This week saw the chancellor of the Exchequer give his keynote Budget speech in parliament - and there was plenty in there for small and medium-sized enterprises (SMEs) to take note of.

For instance, Philip Hammond announced that £435 million would be used to help firms affected by increases in business rates, including a £300 million hardship fund for those hit the hardest.

The chancellor also confirmed that privately-owned SMEs would be given longer to prepare for the digitisation of tax and quarterly reporting.

But the most eye-catching and controversial announcement concerned the increase in National Insurance Contributions (NICs) for the self-employed.

Millions of self-employed people will see their NICs go up by an average of £240, although the increase will be lower for those who earn a maximum of £16,250 a year.

On the one hand, some observers believe this is the right move, given the surge in the number of self-employed people in the UK in recent years.

Indeed, the Resolution Foundation has gone as far as calling it a "welcome and progressive" move, while the Institute for Fiscal Studies wants to see further increases in NICs.

But, perhaps unsurprisingly, the announcement has prompted concerns across the business community itself.

For instance, CBI director-general Carolyn Fairbairn said that while it understands the decision, it believes the government must "continue to incentivise entrepreneurship".

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), raised similar concerns, insisting that ministers must ensure businesspeople "also get the recognition and benefits that correspond to their contribution [to the economy]".

"Many entrepreneurs and sole traders will be disappointed to see significant rises to their National Insurance bills over the coming years," he said.

However, the strongest words of all came from Federation of Small Businesses (FSB), which said the National Insurance rise represents a £1 billion tax hike on those who set up their own company.

Mike Cherry, national chairman of the FSB, believes this undermines the government's objective of positioning the UK as the best place to set up and grow a business.

Furthermore, he said the NIC increase will drive up the cost of doing business.

"Future growth of the UK’s 4.8 million-strong self-employed population is now at risk," he commented.

"Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go."

Mr Cherry insisted that the genuinely self-employed are "fundamentally different" to employees, as they are the ones who take risks that "spearhead growth and productivity in our economy".

This, he argued, means they need help and support from the government, rather than additional tax burdens.

"This measure is a tax grab on middle income self-employed people, who are just about managing," Mr Cherry continued

"Class 4 National Insurance Contributions will apply from about £8,000 to £45,000 in profits. Millions of self-employed will now face this tax hike, including plumbers, hairdressers, designers, musicians and many others in all our local communities."

However, one positive aspect for the SMEs in this week's Budget that shouldn't be overlooked is the focus on skills.

Philip Hammond said: "We will increase by over 50 per cent the number of hours training for 16 to 19-year-old technical students, including a high-quality three-month work placement for every students, so when they qualify, they are genuinely 'work-ready'.

"Once this programme is fully rolled out, we will be investing an additional £500 million a year in our 16 to 19-year-olds."

The chancellor also confirmed that those undertaking higher level technical qualifications at the new Institutes of Technology and National Colleges will be offered maintenance loans.

This could serve as a valuable incentive to get the best people to go on to advanced technical study.

Mike Cherry of the FSB described this as "encouraging", as it should "hopefully lead to high-quality and coherent technical provision for young people".

"It should also improve small businesses’ understanding and confidence in these 15 new educational routes," he said.

The government has also committed to spending up to £40 by 2018-19 on testing different approaches to help people retrain throughout their working lives.

Mr Cherry said the FSB "welcomes this focus on helping individuals, including business owners and their staff, to embrace new skills".

Carolyn Fairbairn of the CBI, meanwhile, said this is a "breakthrough Budget for skills".

"There has never been a more important time for the UK to sit at the global top table of technical education for young people," she commented.

Dr Adam Marshall, director-general of the BCC, added that businesses across the country feel improved technical education and stronger workplace experience are vital if skills gaps are to be filled.

"These announcements represent an important step in the right direction over the coming years," he said.

"Ensuring that businesses of all sizes, and in all regions, have an input into the design of the new system will be crucial to its success."