In his budget on March 21st, George Osborne insisted that his measures were designed so that we could ‘work our way out’ of the troubled economy. His aim, he said was that UK businesses could ‘have the self-confidence to invest, expand, hire, innovate and be the best.’ There were not many surprises among his announcements, because many of his ideas had been leaked and discussed beforehand.
How is he Helping Business?
They did include some tax benefits for small businesses. Corporation tax is being reduced by 1% this year bringing it down to 24%, with another reduction to 23% in 2013. However, for businesses with a turnover of up to £300,000, it will remain at only 20%. Some employers’ National Insurance contributions are slightly reduced as well, so the cumulation of these reductions may add up to a worthwhile benefit.
There is also a radical tax change on the horizon for small businesses as the Chancellor has pledged to consult on a simplification of the tax regime. His idea is to have just a single type of tax payment required for all companies falling within a new definition of a micro-business.
Good budget news for the retail sector is the relaxation of the Sunday trading laws for eight weekends from 22 July while the Olympic and Paralympic Games are on. Planning regulations are going to be more relaxed too, which may be welcomed by the construction industry and other businesses that may be hoping to extend their premises.
A Leg up for the Young
Budding entrepreneurs of between 18 and 24 years of age are eligible to apply for an enterprise loan under a £10 million pilot scheme due to start this summer. The loans will be similar to the student loan scheme and are meant to give young people a step up on the ladder to success, provided they have a viable business idea.
Encouragement for Top Rate Tax Payers
The controversial 5% reduction in the top band of income tax for high earners is intended to encourage more investment and business activity in the UK, and deter them from taking their business and their money elsewhere. The Revenue appears to think the Treasury will not lose out much by this, since many high earners have sought ways of avoiding paying the 50% tax anyway. Critics of course feel that any tax reductions should go to the lower income end of the scale, since so many poorer families are struggling.
It remains to be seen whether the Chancellor’s tactics will give Britain the overall business boost he is hoping for. Contact your local bookkeepers for the latest advice on tax matters.