Autumn Budget 2017: what it means for those working in the beauty industry
Chancellor of the Exchequer Philip Hammond delivered his Autumn Budget 2017 today (November 22) and it will affect the finances of those working in the beauty industry.
In his speech, the Chancellor announced the Government’s plans for tax and spending from April 2018, and it seems high street salons and spas will be hit hard. Here’s how it will affect you.
The National Living Wage is set to rise to £7.83 an hour from April 2018 – a 4.4% increase from what it is today (£7.50). The Conservatives say this will give the lowest paid a rise of about £600 a year but it is still below the real living wage of £8.75. However, this news will hit salon owners hard.
Hilary Hall, chief executive of the National Hairdressers' Federation (NHF), said: “We are disappointed the Government has seen fit to push ahead with such big minimum wage increases. Salons and barbershops are already under intense pressure – prices are rising and consumer confidence appears to be slipping. These increases will cause real pain for many small business owners.
“Our only consolation is that the increase in the National Living Wage is less than we had feared, and is a sign the Government was prepared to listen to our warnings on this at least.”
The National Minimum Wage and National Living Wage rates from April 2018 are:
- The National Living Wage will rise by 4.4% from £7.50 to £7.83
- The National Minimum Wage for 21- to 24-year-olds will rise by 4.7%, from £7.05 to £7.38 per hour
- The rate for 18- to 20-year-olds will go up 5.4%, from £5.60 to £5.90 per hour
- The rate for 16- to 17-year-olds will go up 3.7%, from £4.05 to £4.20 per hour
- The apprentice rate will go up by 5.7%, from £3.50 to £3.70 per hour.
One of the positive outcomes of the budget for therapists is that the basic-rate income tax threshold – the amount you earn before you start paying income tax – will increase from £11,500 to £11,850 in April 2018, while the higher rate threshold will rise to £46,350 – up from £45,0001 today. These changes will save the average basic-rate taxpayer £1,075 a year, Mr Hammond said.
The Chancellor has previously pledged to increase the basic rate to £12,500 by 2020.
Although Hammond said that he recognises that small businesses are under great “pressure” at the moment, he announced will he not reduce the VAT threshold from £85,000 for two years – a blow for salon owners.
However, Hall had a cautious approach to the news, adding: “The NHF has long argued that, for a very labour-intensive industry such as hair and beauty, a more flexible VAT system would be beneficial, and so the fact the Government has said it plans to look at this is potentially positive."
However, he said small businesses will get help on business rates by bringing forward the planned uprating switch from Retail Prices Index (RPI) to Consumer Prices Index (CPI) in two years, where rises in business rates are pegged to CPI measure of inflation not higher RPI.
Business rates revaluations will also now take place every three years, instead of every five, starting after the next revaluation, currently due in 2022.
Brexit was another key issue addressed in the budget, with the industry uncertain how the leave vote will affect footfall to salons and spas.
Hammond announced that £3bn will be set aside over the next two years to prepare the UK, and help calm anxious small and medium-sized business owners, for every possible outcome as it leaves the EU.
Overall, the growth forecast for 2017 was downgraded from 2% to 1.5%, with productivity growth and business investment also revised down. However, another 600,000 people are forecast to be in work by 2022.
