Small businesses appear to be winners in this year’s Budget. George Osborne said one of the central themes of the 2016 Budget was lower taxes for business and enterprise, helping drive the UK’s economy.
The Chancellor said his package of reforms should help create a more level playing field between the UK’s 4 million-plus small businesses and larger multi-nationals.
1. Corporation tax down
The Chancellor’s headline move was another cut in corporation tax, to give the UK one of the most competitive corporate tax regimes in the G20.
Announcing his decision to cut corporate tax from 20% to 17% by April 2020, Mr Osborne branded it ‘one of the most distortive and unproductive taxes there is’.
Previously, Mr Osborne had announced plans to cut the tax to 18%.
At the same time there were measures designed to stop large multi-nationals – operating in several jurisdictions – from avoiding UK taxes.
Toby Ryland, a corporate tax partner at chartered accountants HW Fisher & Co, said: ‘Still smarting from accusations that he was soft on Google, the Chancellor sought to walk a tightrope between a voter-pleasing bashing of multi-nationals and encouraging inward investment, particularly in small businesses.’
He added: ‘For most businesses, this is a good Budget. But large, tax-avoiding businesses have been offered a stark carrot-or-stick choice on tax.’
2. Business rates down
The Federation of Small Businesses welcomed the Chancellor’s announcement that business rates would be radically reduced and reformed for smaller business.
These changes amount to a £7bn saving for UK smaller business, according to Mr Osborne, and will mean more than 600,000 smaller businesses in the UK no longer have to pay these rates.
The main change was raising the threshold at which companies are liable from £6,000 to £15,000. This is now a permanent move, following temporary lifts to help smaller companies deal with the fallout from the financial crisis.
In addition, future business-rate increases will be linked to the Consumer Price Index, rather than the Retail Price Index, which tends to offer a lower measure of inflation.
Mike Cherry, policy director at the Federation of Small Businesses, added: ‘The combined measures announced on business rates – the single biggest tax cut in today’s Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform.’
3. Commercial stamp duty down
In previous years, there have been radical changes to the way Stamp Duty is charged on residential house purchases.
The Chancellor used this Budget to introduce similar reforms for the commercial property sector – with effect from midnight on March 16.
These changes should mean businesses buying smaller, cheaper properties pay far less tax on such purchases. Larger corporations, buying bigger premises, or those in prime locations face higher tax charges.
The new Stamp Duty rates mean that there is now zero tax to pay on commercial property purchases up to £150,000. There is then a 2% band, on the next £100,000, and 5% to pay on property valued over £250,000.
The bands will be graduated – so someone buying a property for £260,000 only pays the top 5% rate on the £10,000 over the £250,000 threshold. They don’t pay this rate on the full purchase price, as they did under the old Stamp Duty Land Tax (SDLT) system.
4. Fuel duties frozen
Smaller business will save money as a result of the Chancellor’s decision to freeze fuel duties – for the sixth year in a row. This will mean that businesses across the UK can continue to feel the full benefit of lower fuel costs.
Mr Osborne said this move would equate to £270 a year to a small business with one van on the road.
5. Infrastucture boosted
It was perhaps no surprise that the Chancellor unveiled investment into key infrastructure projects. He gave the green light to a high-speed rail link between Leeds and Manchester, has committed a further £80m to allow the £27bn Crossrail 2 project to proceed, and has asked Lord Heseltine to lead a Thames Estuary 2050 Growth Commission.
All this should provide opportunities for many small businesses in these regions. Mr Cherry at the Federation of Small Businesses said this wider package of measures should help boost the small business sector. “The new devolution deals, alongside increased investment in roads, rail and flood defences, should give a much-needed boost to the UK’s infrastructure.
‘Altogether, these measures should help to drive productivity and boost small business confidence levels, which have faltered recently in the face of a number of domestic policy and global economic challenges.’
For business owners, this is good news. If you’re also the owner of the commercial property from which your business operates, make sure your finance-savvy plans include insurance. Having the right level of commercial property cover in place stands to protect your business from unforeseen costs that might accompany building damage.
The views, opinions and positions expressed within a guest post are those of the author and do not represent those of Hiscox or its employees.