The chancellor's first budget contained some welcome news with increased capital spending for rebuilding schools, hospitals and transport systems. However, clobbering companies with tax rises to help pay for it wasn’t the pro-business approach that many were hoping for. 

Ian Anfield, managing director, said: “Infrastructure needs a massive injection of cash, which will be good for construction – if it is spent wisely – and we await details of the promised 10-year strategy. 

“The chancellor often refers to ‘fixing the foundations’ but small family-owned firms are the bedrock of the economy. Many can’t afford higher tax bills, increased wages and extra red tape when they are battling with cash flow, finding labour and winning work.”

Here’s our summary of the key changes for construction:

Clampdown on umbrella companies

The government is set to clampdown on tax non-compliance in the umbrella company market. Hudson does not provide umbrella arrangements and we welcome this move to protect operatives from large, unexpected tax bills caused by unscrupulous providers. 

The government will make agencies responsible for accounting for PAYE payments made to operatives supplied via umbrella companies. Where no agency exists, this responsibility will shift to the end client. 

5,000 extra compliance staff

The government plans to recruit an additional 5,000 compliance staff with the first 200 starting training this month. It has promised to take stronger action on the most egregious tax fraud and expand criminal investigation work.

Investment in IT projects and surveillance technology

Alongside additional staff, HMRC will be given a large budget to improve its IT, making it easier to track businesses and individuals and single out compliance targets.

Increased employer NICs and national wages

The government will increase the rate of employer National Insurance Contributions from 13.8 per cent to 15 per cent and lower the threshold from £9,100 to £5,000 from April 2025. Employer NICs only apply to those workers aged 21 and over. The national living wage will rise from £11.44 to £12.21 an hour from April 2025, while the national minimum wage for 18 to 20-year-olds will also rise from £8.60 to £10 an hour. 

Tax rises across the board

Business taxes are increasing across multiple areas: company vehicle tax reforms including double-cab pickups, higher aggregates levy, and broader business rate hikes. Property investors face increased stamp duty, while business owners will be hit by capital gains and inheritance tax changes. HMRC is also tightening R&D tax relief rules following widespread abuse. 

Planning and skills 

The government has promised ambitious planning reforms to remove barriers to growth and said the creation of Skills England would ensure Britain has the highly-trained workforce needed to deliver economic growth. It should also see an end to the failing CITB.

Inheritance Tax

Changes to the dreaded death tax will catch those who wish to pass their businesses and farms down to the next generation. For construction firms it is particularly tough because with plant, equipment, yards and property all caught, it will be increasingly difficult for the next generation to fund the tax bill if they wish to step in their parents’ footsteps running the family firm. 

Ian Anfield added: “If you would like to discuss any of these matters, please drop us a line or give us a call on 01262 401040.”