The Budget: round-up for small businesses

 

VAT
VAT will 2.5%, from 17.5% to 20% from January 4 2011.
This is to create £13bn to put towards the deficit, but it's a savage kick in the teeth for retailers in particular.
Corporation tax
Corporation tax for small businesses will be cut from 21% to 20% next year.
Corporation tax for businesses in general will fall by 1% a year, every year for next four years, so will be only 24% in four years. This makes it more favourable than most other European countries.
The BBC's Iain Watson says: "The cuts are quite modest - the right of the Conservative Party would have liked to see the tax cut overall to 18 or 20%, not just 24% over four years."
National Insurance
From April 2011, National Insurance will be £21 per week for employees earning more than £20,000.
Employees earning less than £20k will be exempt from NI. This takes 650,000 workers out of the National Insurance scheme.
As of today, any new businesses set up outside London, the South East or the East of England will be exempt from NI payments for the first 10 employees hired.
Capital Gains Tax
CGT will increase to 28% - which is not as bad as the expected 40% (see this blog for our views on why we think big CGT increases are detrimental to enterprise) - but it's still not great. It is, however, a middle ground between Tory and Lib Dem views, which is probably why it's hovering there.
In better news, the CGT increase will only apply to higher-rate tax-payers, and he 10% CGT investment allowance (the 'entrepreneurs' relief) for first £2m will be extended to £5m.
The 18% CGT rate for lower-income earners will stay the same - but how 'lower-income' is defined will be the tell here.
Other small business measures
The Enterprise Finance Guarantee will be extended, which is good news, but no details yet on how long for.
Backdated business rate bills will be cancelled for certain businesses.
Manufacturing industry as a whole will pay less tax.
Capital allowances are decreasing.
The move to increase in state retirement age to 65 will be accelerated. Read this blog to find out why we think this measure will help small businesses.
No new increases on alcohol, tobacco or fuel duty - so some solace for the pub and driving industries, who normally both get a bashing in budgets.
Personal allowance on income tax increases by £1,000 to more than £7,000, giving 23 million people an extra £150 a year. Will this create just create more admin for small businesses who need to update their tax systems though?

National Insurance

  • From April 2011, the threshold at which employers start to pay national insurance contributions will rise by £21 a week above the rate of inflation for employees earning more than £20,000.
  • Employees earning less than £20k will be exempt from NI. This takes 650,000 workers out of the National Insurance scheme.
  • As of today, any new businesses set up outside London, the South East or the East of England will be exempt from NI payments for the first 10 employees hired.

Capital Gains Tax

  • CGT will increase to 28% - which is not as bad as the expected 40% (see this blog for our views on why we think big CGT increases are detrimental to enterprise) - but it's still not great. It is, however, a middle ground between Tory and Lib Dem views, which is probably why it's hovering there.
  • In better news, the CGT increase will only apply to higher-rate tax-payers, and he 10% CGT investment allowance (the 'entrepreneurs' relief) for first £2m will be extended to £5m.
  • The 18% CGT rate for lower-income earners will stay the same - but how 'lower-income' is defined will be the tell here.

Other small business measures

  • The Enterprise Finance Guarantee will be extended, which is good news, but no details yet on how long for.
  • Backdated business rate bills will be cancelled for certain businesses.
  • The manufacturing industry as a whole will pay less tax.
  • Capital allowances will decrease.
  • The move to increase in state retirement age to 65 will be accelerated. Read this blog to find out why we think this measure will help small businesses.
  • No new increases on alcohol, tobacco or fuel duty - so some solace for the pub and driving industries, who normally both get a bashing in budgets.
  • Personal allowance on income tax increases by £1,000 to more than £7,000, giving 23 million people an extra £150 a year. Will this create just create more admin for small businesses who need to update their tax systems though?

 

 

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