Chancellor George Osborne revealed a mixed bag of measures that will affect small businesses around the UK in the new coalition government's first Budget.
Mr Osborne announced the Lib-Con coalition will not be making any cuts to capital expenditure during this parliament. This could come as good news to a number of businesses in the construction sector and should serve to protect a number of jobs.
However, one of the highlights of the speech with regard to small business organisations was the introduction of a new tax scheme. Under the new initiative, small businesses will be exempt from up to £5,000 of employer National Insurance payments for the first ten employees that are hired. This means new companies will save up to £50,000.
However, the scheme will not be offered to companies starting up in London or the south-east, the chancellor said.
Mr Osborne explained, "The government will shortly announce details of a scheme to help new businesses in targeted areas of the UK that need it most. During a three-year qualifying period, new businesses which start up in these areas will get a substantial reduction in their employer National Insurance contributions," Mr Osborne explained. He added: "The countries and regions which will benefit will be Scotland, Wales, Northern Ireland, the north-east, Yorkshire and the Humber, the north-west, the East Midlands, the West Midlands and the south-west."
Businesses could also be encouraged by the chancellor's announcement that corporation tax will be reduced by one per cent next year. It will then continue to be reduced in instalments of one per cent for a total of four years. By the end of the reductions period, corporation tax is expected to stand at 24 per cent.
Mr Osborne commented: "The government understands the importance of the whole corporate tax system to business and will set out a more detailed programme for reform in the autumn. This will allow it to take a considered approach to implementing tax reforms and to listen to the needs of business through greater consultation. The government will provide greater certainty for business by committing to principles for corporate tax reforms. In particular, it intends to develop its view that in general a broad tax base, a low rate and a more territorial approach will improve competitiveness."
Small businesses stand to see a more immediate reduction in the tax after the government announced that small companies corporation tax will be cut to 20 per cent in 2011.
The chancellor also announced that the enterprise finance guarantee scheme will be extended, ensuring that finance for businesses remains accessible.
One of the announcements made that will affect individual taxpayers was the confirmation of an increase in the personal tax allowance. As was widely expected by industry experts, the chancellor announced a £1,000 increase, meaning income tax will now only be paid on earnings above £7,475 from April next year.
However, it was not all good news for businesses in Mr Osborne's first real chance to show what sort of chancellor he will be. The Conservative MP confirmed that Value Added Tax (VAT) will, as expected, rise to 20 per cent from January 4th next year. This will be seen as a "blow" for many of the country's smaller firms, who earlier this week said such a move would be damaging.
A recent survey published by the uSwitch price comparison website revealed that 87 per cent of business owners said the rise will hamper their business, with one-third saying it will have a negative effect on consumer spending.
Jake Ridge, the firm's small business energy expert, said: "Small firms seem to be very clear about one thing - a VAT rise will be bad for business. "They need support from the government to help safeguard their future - a VAT hike could be one blow too many for businesses who have faced the brunt of the recession and are now battling their way to recovery."
Residential landlords operating in the buy-to-let sector could also be forced to hang on to their investments after the chancellor announced that capital gains tax will be set at 28 per cent for taxpayers on higher rates. While the rate is lower than many experts had predicted, the timing of the change, which came into effect as of midnight on 22nd June 2010, means those planning on selling investments before the change will no longer be able to avoid the rise.
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