Earlier today at 12:30pm the Chancellor, George Osborne, held aloft his red box and revealed a number of measures that directly affect small businesses.
So what should Britain’s small businesses take notice of?
Small business rates relief
The threshold for small business rate relief has been permanently raised from £6,000 to a maximum of £15,000 and for the higher rate from £18,000 to £51,000. These reforms mean that 600,000 small businesses will not pay any rates from April 2017.
The earnings threshold at which taxpayers start paying tax has been raised to £11,500 from April 2017. This definitely will not help the 4 million poorest people who don’t pay any tax.
Further cut for Corporation tax
Corporation tax will be cut even further than previously announced. By April 2020, the rate of corporation tax for all companies would fall to 17% from the 28% at which it stood at when the Conservatives came to power.
“Britain is blazing a trail,” said Osborne. “Let the rest of the world follow.”
Tax break for micro-entrepreneurs battling online giants
There is some good news for “micro-entrepreneurs”. Tagging it ‘a tax break for the digital age’, Osborne revealed two new £1,000 allowances from April 2017 for online merchants and short-term landlords. Specific reference to short-term lettings site Airbnb and online marketplace eBay were made. There will be no tax return forms to fill in and at least 500,000 people will benefit from it.
Capital Gains Tax – investors to win, landlords to lose out
There is some good news for investors but no so good news for landlords. The higher rate of capital gains tax (CGT) is being cut from 28% to 20%, and 18% to 10% for basic rate tax payers. Osborne said, “The rates will come into effect in three weeks’ time. The old rates will be kept in place for gains on residential property and carried interest.”
But this change won’t help landlords, because CGT on residential property and carried interest will be subjected to an 8% surcharge.
Class 2 NI abolished from April 2018
From April 2018, the government will abolish Class 2 National Insurance Contributions altogether. This will see a tax cut of over £130 for each of Britain’s “3 million strong army of the self-employed”.
Stamp duty surcharge
The assault on the Buy-to-let sector continued. From April 2016, large-scale investors in buy-to-let properties will pay the chancellor’s 3% stamp duty surcharge. This is in contradiction to the suggestions he made in the Autumn Statement. However, owners of commercial property received a shot in the arm as rates of stamp duty land tax for commercial property will fall in the lower bands, with a zero rate for properties valued at to £150,000. The changes will come into effect from tonight.
Surprise new levy on the sugar drinks industry
The government introduce a sugar tax that will come into effect in 2018. Osborne said that many supermarket brands are already committed to reducing the sugar content across their ranges and this new levy will raise £530m which will be spent on primary school sports. Not surprisingly, immediately after the announcement, shares in soft drinks makers AG Barr, Nichols and Britvic plummeted.
Fuel duty freeze
This is great news for any small business that operates vehicles. The chancellor reckons this move will save the average motorist £75 a year.
Osborne said: “We had pencilled in an inflation rise, but fuel duty will be frozen for the sixth year in a row. It’s the tax boost that will keep Britain on the move.”
Beer, cider and tobacco
Beer and cider duty will remain unchanged as will the levy on whisky and other spirits. There will be a 2% increase in tax on cigarettes, with 3% on rolling tobacco, from 6pm tonight.
New life ISA (Lisa) for under 40s
Looks like the proposals to shake up pension tax relief have been scrapped. Instead a new lifetime ISA was announced. Any adult between 18 and 40 will be able to open a new lifetime ISA allowance from April 2017. The government will add £1 to every £4 they save until they are 50. However, there will be a limit of £4,000 a year on what you can save in it.
According to the Chancellor, if you hold a help-to-buy ISA you can roll the savings into the new ISA. Osborne also raised the general ISA limit from £15,240 a year to £20,000 a year from next year.
Tax avoidance crackdown to raise £12 billion
The government plans to £12 billion by 2020 by cracking down of a handful of major tax avoidance tactics. One of the biggest changes is to stop public sector employees being paid via PSCs to avoid income tax.
We will be issuing a complete summary of the 2016 Budget tomorrow, which will offer informative comments to help you assess the likely effect that the proposed changes may have on you, your family and your business for the year to come. In addition, we will also be issuing a useful summary of the new Tax Rates and Allowances.