Digital and Creative Industries in the Leeds City Region; Are you up or down after the 2015 Budget?
If you only have 10 seconds to scan this post then in my opinion the answer to the above question is , Yes, the digital and creative sectors are winners. If you want to know why I’m being optimistic then read on.
The Chancellor proved his commitment to the Northern Powerhouse concept in mentioning both devolution and local transport improvements. Indeed, he even committed to spending £30m over the next 3 years on improving “Transport for the North”. Anything which quickens journey times between the three prominent digital and creative sectors of Leeds, York and Manchester has to be great news for the sector. There was no further mention of HS3 though. Oh and Boy George also promised an Oyster style ticketing system for the entire North; although implementing this alone might cost the majority of the said £30m.
He also earmarked £22m (leveraged up to £45m) specifically for the digital innovation economy, citing York as a centre for research and “connecting people with digital technology”.
All good stuff so far and you definitely get the feeling that this is the first budget since 2008 to move away from the austerity measures of the last 7 years.. The trickle down effect from a freer spending public sector could also benefit digital and creative and agencies in the region.
Getting down to the nitty gritty, the National Living Wage increase to £9 an hour by 2020 is an obvious concern to an industry where nurturing young talent is essential. However; his proposals for an 18% corporation tax rate (the lowest headline rate in Europe) and improved support for training and apprenticeships does offset this headline grabbing cost to a typical company.
A very valuable but often overlooked benefit to small start ups and niche creatives is the current £2,000 Employment Allowance which will be increasing to £3,000 from 2016. This is an additional £1,000 actual tax back from your Employers National Insurance Contributions.
As companies expand in the post austerity Leeds Region, they may also want to take advantage of the greater flexibility from employees. 30 hours of free childcare is now offered for 3 to 4 years, which is an increase from 15 hours.
The more permanent Annual Investment allowance of £200,000 should give some comfort to companies with high capex such as Data Storage businesses who were expecting a cut to £20,000 at the end of December.
If you’ve got this far then I’ll finish on what I consider to be a big negative and aimed at the typical business owner who uses their basic rate tax allowance to take out up to as much as £38,000 in dividends without suffering any national insurance or income tax. From 2016 any dividends above £5,000 will typically cost the business owner 7.5% more in personal tax, although with careful planning the additional tax can be mitigated to as little as £350. This is a wake up call to the Government’s stance on the use of dividends to pay the owners of a company and business owners should, in 2015/16, include some essential tax planning with your accountant and maximise the tax-efficiency of your dividends.