On the 16th March 2016, the Chancellor of the Exchequer, George Osborne unveiled his 8th budget which he referred to as “a budget that backs businesses”. Within this budget there are some crucial business policies that all small business owners should be aware of.
A raft of measures to help enterprises including a reform of the business tax system, rate relief and ‘tax breaks for the digital age’ were announced.
There will be two new tax free £1,000 allowances that will take effect from April 2017, one allowance will be for income on any property you own and the other will be for selling goods or providing services.
Also taking effect from April 2017 , small business rate relief will increase from £6,000 to £12,000. This means that small businesses that occupy property with a rateable value of £12,000 or less will not pay any business rates and a tapered rate relief will be applied to properties worth up to £15,000. The effect of this according to George Osborne is that 600,000 businesses will no longer pay rates.
Reductions to corporation tax and capital gains tax were also announced. Corporation tax will reduce to 17% from the current 20% by April 2020 and from April 2016 the higher rate Capital Gains Tax will reduce from 28% to 20% and the basic rate Capital Gains Tax will drop from 18% to 10%. There will however be 8% surcharge on these new rates for gains on residential property.
Self- employed people will benefit from Class 2 National Insurance Contributions (NIC’s) being scrapped, meaning only one type of National Insurance (Class 4 NIC’s) will be applicable on a profit of over £5,965 per annum.
Entrepreneurs’ Relief will be extended specifically to encourage investors to back unlisted companies; the Chancellor has added an additional £10m of relief on top of the existing limit.
The government plans to raise almost £8bn from large firms and multinationals in order to benefit small companies, through changes to rules on interest and other measures, these include:
• Introducing rules to prevent multinational companies that avoid paying tax in any of the countries they do business in
- Taxing outbound royalty payments better meaning multinationals pay more tax in the UK
- Making sure offshore property developers are taxed on their UK profits
George Osborne said this £8bn will be reinvested in helping the small businesses that “pay their fair share”.
Tax will be cut for many small businesses purchasing property by reforming Stamp Duty Land Tax on non-residential property transactions (office spaces and the like).
For the sixth year running, Fuel Duty will be frozen.
Drinks businesses will be impacted by a levy that companies will have to pay on drinks with added sugar from April 2018. The money raised from the levy will be used to double the sports premium for schools to £320m a year.
The government will invest £60m for the High Speed Rail 3; this will benefit businesses in the North by cutting journey times to around 30 minutes between Leeds and Manchester. £80m will also be invested in Crossrail 2 to connect South West and North-East London.
And finally, the government will devolve powers to local mayors in their focus of making the ‘Northern Powerhouse’ a reality.
This is a brief summary of some of the key points of this year’s budget announcement however, it should not form the sole basis of business or investment decisions without consideration of the specific circumstances of the individual and the business.
Understanding the specifics of these changes is a conversation worth having with a trusted advisor to maximise the efficiency of your business and financial planning for the years ahead.
A good accountant will be happy to explain the pros and cons of government changes and how they affect you and your business. Here at Keen Dicey Grover our door is always open to talk you through the complexities of tax, allowances and government policies.
We make it our policy to work with our clients to ensure best practice use of business structures to ensure they are operating in most financially efficient way, now and in the future. By ensuring our clients are confident and informed about their financial business structure, we know this enables them to concentrate on building their business and growing their finances.
Keen Dicey Grover
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