Budget 2016: A Small Business Perspective
Osborne called this year's budget a "budget for small business". But what do the key announcements actually mean for enterprise?
The 2016 Budget was today unveiled by the chancellor of the exchequer, George Osborne. Labelled as a “budget for small business” and one that will “put the next generation first”, Osborne continually reiterated the expectation that the UK’s economy will grow faster than any other major economy in the world.
Osborne wasted little time in supporting the UK’s position within the EU – referencing the Office for Budget Responsibility’s fears that a potential Brexit could cause “uncertainty” for the country’s economy.
Aiming to help small businesses, Osborne claimed the budget will favour business owners who “pay their fair share” while attempting to get rid of loopholes that help multinationals avoid paying tax.
In a budget designed to help smaller enterprises, we take a look at the key policies small business owners should be aware of:
New tax-free allowances for the sharing economy
The government will be introducing two new tax-free £1,000 allowances that will come into effect from April 2017.
One allowance will be for selling goods or providing services and the other will be for income on any property you own.
Reduction in Capital Gains Tax
The higher rate of Capital Gains Tax has been cut from 28% to just 20% with the basic rate cut from 18% to 10%. This change will come into effect next month but does not extend to residential property and carried interest.
Reduction in tax for self-employed
Class 2 National Insurance has also been abolished for the self-employed, which should be a welcomed boost for over three million self-employed Brits.
Corporation Tax will be 17% by 2020
The main rate of Corporation Tax, which had been cut from 28% in 2010 to 20%, will now be cut again to 17% in 2020, in an attempt to benefit small businesses.
Business Rates in England have been cut
Business rates for all properties in England have been cut. Business owners with premises with a rateable value of less than £12,000 will receive 100% relief. Premises worth up to £15,000 will receive tapered relief. This means 600,000 small firms will now pay no business rates with hopes to reduce the rate burden by £6.7bn over the next five years.
The doubling of small business rate relief has also been extended to April 2017.
Employers will pay National Insurance on pay-offs above £30,000 from 2018
From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due.
Sugar drinks levy introduced
A new soft drinks industry levy targeted at producers and importers of soft drinks that contain added sugar will be introduced in two years. The levy is designed to encourage companies to reduce the amount of added sugar in the drinks they sell.
Fuel duty has been frozen for the sixth year straight, which should save the average driver £75 a year.
Boost to UK’s “Northern Powerhouse”
In a boost to build the ‘Northern Powerhouse’ and one of a number of ‘devolution revolution’ policies, the green light has been given for High Speed 3 between Leeds and Manchester, aiming to bring down journey times from 50 minutes to around 30 minutes.
Further measures include an investment of an extra £161m to accelerate the transformation of the M62, and £75m to improve other road links across the North including the A66 and A69.
Osborne said Budget 2016 will help “make the Northern Powerhouse a reality”.
Multinationals to pay-up
In what Osborne described as a ‘fundamental reform’ of the tax system, the government will attempt to raise £8bn from multinationals who attempt to avail of legal loopholes to avoid paying tax.
On the same note, he committed his support of small businesses who “pay their fair share”.