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Budget: How the Autumn Statement will affect cleaning businesses

07 November 2018

Business owners held their breath as Chancellor of the Exchequer Philip Hammond unveiled the Budget last month, looking for signs of economic confidence as the UK prepares to leave Europe.

While Hammond shied away from making big brash statements, there was plenty within the Budget to keep business owners busy. If you are interested in how the Budget will affect your cleaning business, read on for the key points.

How will your wage bill change?

While many low-wage employees may be happy to see the living wage rise from £7.83 an hour to £8.21 an hour from next April, for employers the move will mean an increase in wages by £690 per person. Cleaning business owners will also have to pick up the tab for the additional national insurance contribution (NIC).

There had been some concerns that the Chancellor would make some reforms to the National Insurance Employment Allowance, which allows employers to cut NIC by up to £3,000. While the allowance will be restricted, small business owners with a National Insurance bill of less than £100,000 will still qualify, which will no doubt come as a relief to many.

Time to make investments?

There is good news for cleaning companies that plan to make investments in business equipment. Hammond increased the annual investment allowance to £1m per annum from £200,000. It means that cleaning companies that want to invest in machinery and equipment can do so with 100% tax relief on any spends up to £1m.

The Budget also looked to encourage investment in people at a time when employment is at an all time high. The UK is expected to create a further 800,000 new jobs by 2023, but to encourage growth in the number of apprenticeships made available by smaller businesses the Treasury has halved the apprenticeship levy paid by smaller businesses to 5%.  

Is it all good news?

For small and micro business owners this was a Budget that made some positive concessions. In addition to the small giveaways above the Treasury opted to freeze the VAT registration threshold at £85,000 for the next two years.

Most employees will also pay less income tax in 2019/20 with the personal tax allowance threshold rising to £12,500. This works out as an extra £155 a year in your pocket if you earn between £12,500 and £50,000, and an extra £566 if you earn between £50,000 and £100,000.

Yet concerns remain about changes to the IR35 tax regime which could have implications for many of those cleaners who work on a self-employed basis. 

From April 2020 all medium and large sized businesses will be forced to review all contractor agreements with self-employed workers to ensure they are sitting in the right tax regime. If you are self-employed and have a contract with a medium or liable business, your client will become liable deducting income tax and employee national insurance contributions (NICs) as well as paying employer NICs. 

While this move is primarily aimed at higher-earning contractors such as computer programmers, we may find that cleaners who are self-employed will get caught up in it as businesses impose compliance rules on all their contractors.

In the commercial sector preparation is key. If you are a large businessowner who employs contractors, it is time to start assessing now who is in and who is out of IR35. 

For the self-employed it may be time to do a few sums to assess how the IR35 will impact your own income. The reality is these people will be expected to move into an umbrella company, so it is time to start researching what is available and gauging their relevance to your business, as well as asking other cleaners who they use.

The coming financial year will be challenging for all businesses as the UK gets used to life outside the EU. Now is the time to take control of your finances to ensure your business is prepared for the road ahead.

Lee Murphy is the founder of Pandle (www.pandle.co.uk) the cloud bookkeeping software specifically for small businesses and the self-employed.

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