Chancellor George Osborne unveiled his 2013 Budget on March 20th, revealing a number of measures that directly affect small businesses. So what should Britain’s start-up firms take notice of?
National insurance bill
The first £2,000 of an employer’s national insurance bill will no longer have to be paid. Mr Osborne called this the “biggest tax cut in the Budget” and it will ensure that as many as 450,000 small businesses will pay not have to pay the tax at all.
In particular, this will be a boost to many very small firms that have been deciding whether or not to take on their first employee. The move will mean that business owners will be able to knock nearly £200 a month off the cost of the person’s first salary, which is a great incentive to expand.
“They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax,” Mr Osborne explained.
The move has been welcomed by the likes of the Federation of Small Businesses, which said the cut was “beyond what we were asking for”.
Fuel duty price freeze
For small businesses that operate vehicles, the cancellation and subsequent three-and-a-half year freezing of the planned 3p increase to fuel duty will also come as great news. It will reduce operating costs and even mean any employees that drive to work can save on their commuting costs.
The freeze ensures that petrol is 13p a litre cheaper than it would otherwise have been if it hadn’t been frozen for the last two years. For someone filling a car such as a Ford Focus or Vauxhall Astra, this could save them around £7 every time they refuel.
Growth rate cut
It was not all good news for small businesses, with the downgraded growth forecast from the Office for Budget Responsibility (OBR). It was expected to reach 1.2 per cent this year, but is now just 0.6 per cent thanks to “unexpectedly poor performance of exports”, which could have an influence on the plans of some businesses that had intended to expand in 2013.
Growth is expected to pick up to 1.8 per cent in 2014.
Support for the Seed Enterprise Investment Scheme
The government has increased its support for the Seed Enterprise Investment Scheme (SEIS), ensuring that the capital gains tax holiday will remain at least for another year.
It offers 50 per cent income tax relief on any investments made into small companies and start-ups. However, investors that make capital gains during the upcoming financial year will also receive a 50 per cent relief if they reinvest funds into seed companies up to 2014/15.
This is great for entrepreneurs who are hoping to raise funds through the system, as it makes SEIS more attractive to investors.
Patrick Harrison, tax partner at PKF called the move “smart”, particularly at a time when securing business finance can be difficult.
"Sensible tax incentives can help plug the funding gap provided the Treasury gets the balance right," he said.