Will small businesses benefit from the 2016 budget statement?
Last month the Chancellor of the Exchequer delivered his annual Budget statement in the House of Commons.
In his fourth budget as chancellor, George Osborne set out what he called “fundamental changes” to the tax system, promising “a huge boost for small business and enterprise”. But in a year that’s seen surprising developments in the economy worldwide, do Osborne’s pledges really stand to benefit Britain’s small businesses?
Business rates
The pledge: The new threshold for small business rate relief will rise from £6,000 to a maximum of £15,000. The threshold for the higher rate will rise from £18,000 to £51,000.
What it means: Business rates are worked out based on the ‘rateable value’ of business premises, and are paid to local councils annually. Where applicable, businesses can apply for and receive a discount on these rates each year. Relief had previously only been available to businesses whose rateable value was under £6,000, limiting the opportunities of most businesses to develop. The new threshold of £15,000 will see 600,000 small businesses across Britain paying no business rates from next April.
How will this affect small businesses? The move to free up vital funds for 600,000 small businesses may well be of great help to those struggling against expensive overheads. Without a doubt this is the most attractive of all Osborne’s proposals to small business.
Corporation tax
The pledge: Corporation tax to be lowered from 20% to 17% by April 2020.
What it means: The rate at which British companies’ profits are taxed by the government will be lowered from 20% to 17% in 2020. Further reforms to the tax system to be implemented, to have larger multinational companies abide by the regulations more closely.
How will this affect small businesses? Another popular move for small business – and a hot topic in the news concerning international companies – as the rate of corporation tax is set to drop. This comes as another welcome piece of news for companies who may have been cautious about expanding their operations. With the reduction in tax on profits, that money can potentially be put back into training, recruitment or further expanding the company.
Insurance Premium Tax
The pledge: The Chancellor has announced a rise in Insurance Premium Tax from 9.5% to 10%. It’s expected that this further rate hike (IPT went up from 6% to 9.5% in November 2015) will raise £700 million that will be used to increase UK flood defences.
What it means: IPT is levied on all insurance products – both personal and business insurance. Osborne has pledged to increase the rate of Insurance Premium Tax with the intention of spending what he raised on shoring up our flood defences. There’s been negative reaction from consumer groups, shocked at the further increase so soon after the 2015 Autumn Statement which already raised rates.
How will this affect small businesses? In recent years, flood damage has devastated British businesses, costing valuable trading time and money to bring them back up to standard. Pledging to boost the country’s protection against increasingly adverse weather conditions is a decision that many will back, but raising the money by further increasing IPT is bound to be a bone of contention for both the Opposition and consumer groups.
Will businesses benefit?
While the issue of flood defence money has already caused concern, the 2016 Budget looks set to benefit British businesses in a big way. If raising the threshold for business rates turns out to be half as effective as Osborne promises, small businesses all over the UK are likely to call this latest Budget a very positive one.