For small businesses:
In our “wish list for small businesses” published earlier this month, we asked for:
- A reduction in red tape and its associated costs
- The overhaul of business rates – long overdue
- Further National Insurance savings for employers
So, did we get what was on our wish list?
There was clearly an effort by the Chancellor to make his Budget appeal to small businesses and the increases announced to rate relief allowances should mean that 600,000 of the smallest companies won’t have to pay Business Rates. This should save £6,000 per annum on average.
The £2,000 Employment Allowance will increase to £3,000 from April 2016 – reducing the cost of employer National Insurance contributions.
No reduction in red-tape, but we’ll take two-out-of-three items on our wish list and call that a success!
Other measures affecting small businesses:
As usual, there were items dropped in for effect, that hadn’t been widely leaked beforehand but which will have a significant impact on businesses.
- A reduction in Corporation tax; from 20% currently – down to 19% in 2017 and dropping further to 17% by 2020
- A reduction in Commercial Property Stamp Duty. Firstly, rates will move to a ‘slice system’ so that you pay the tax rate applicable on each band, rather than a fixed amount on the whole transaction value. The new rates are 0% on the first £150,000, 2% between £150,000 and £250,000; and 5% above £250,000. Whilst these new rates will be more expensive for properties above £1.05m they will cost less for small property transactions
- Capital Gains Tax will be reduced from 28% to 20% and the basic rate will be cut from 18% to 10% from April 2016 with Entrepreneurs’ Relief extended to long-term investors in unlisted shares too. Residential property investors have been singled-out again in this Budget as these Capital Gains Tax reductions will not apply to residential property
We were most worried (until recently) that the pension landscape would be changing again and we received the recent announcement that pension tax relief would be left alone with a certain degree of scepticism. While we still firmly believe that pensions will come under fire in the future, for the time being at least there are no changes to announce.
The ‘Lifetime ISA’ is an interesting twist that may well hint at pension changes to come but, for now, it’s welcomed as an alternative way for individuals (under the age of 40) to save towards either buying their own home or towards their retirement. Saving up to £4,000 per year, with a top-up from the Government, should encourage savings. It’s good news, too, that investors in the (largely) well-received ‘Help-to-buy’ scheme can roll their investment into the new Lifetime ISA.
Increases to Personal Allowances, up to £11,500, will move more people out of paying tax and, with careful tax-planning, could mean that individuals earning up to £22,500 pay no tax at all.
So we see this as a “not really offending anyone” Budget but warmly welcome the recognition it offers for Britain’s ‘Nation of Shopkeepers’. The early mention of “lower taxes on business and enterprise” certainly set the tone for the rest of George Osborne’s speech.
Click the image below for the key facts and figures from the Budget