Last week saw the announcement of Chancellor, George Osbourne’s Budget for 2014. Here we give our response and identify some of the announcements that are likely to interest small business owners most. Before we get into the detail, let’s take a look at the key take-aways.
- The personal allowance will rise from £10,000 to £10,500
- The 40p income tax threshold is to rise from £41,450 to £41,865 in April, and will subsequently rise a further 1% to £42,285.
- Those alleged to have employed tax avoidance schemes will be required to pay upfront, and then appeal at a later date.
- Tobacco tax will rise
- Duty on beer has been cut by 1p
- Alcohol duty will rise inline with inflation, but duty on cider and whiskey has been frozen
- MPs will vote on a proposed £119bn cap on welfare spending (excluding unemployment benefits and pensions) this week.
- The 10p rate has been abolished
- The tax free ISA limit has risen to £15,000
- The Annual Investment Allowance will double to £500,000 until the end of next year
- R&D tax relief will go rise from 11% to 14.5% from 1st April
- The UK Export Finance loan scheme has been doubled to £3bn
- The Seed Enterprise Investment Scheme (SEIS) giving tax relief to certain small business investors to be made permanent
- Under 21s declared exempt from National Insurance contributions
- Announcement of a £7bn package to cut energy bills for British manufacturers, including capping the carbon price floor from 2016/17 until 2021
- VAT threshold to rise to £81,000
- £500m of finance to small house builders
- A further £150m to fund the Right to Build scheme
- £200m fund set aside to repair potholes
- Air passenger duty to be reformed
- The September fuel duty rise has been scrapped
The benefits for small business
So, what does it mean for small business owners? We’ll skip the changes to Income Tax and alcohol duty (although the cut in beer duty and freezing of duty on cider and whiskey will no doubt please the growing number of small breweries and distilleries) and take a quick look at some of the business targeted announcements. Generally there was little for the small business owner to celebrate or condemn in this budget, however, much of what was proposed is likely to benefit medium and large enterprises more.
The doubling of the Annual Investment Allowance is good for larger companies, but is likely to have little effect on small business owners unless you are planning to purchase over £250,000 of new equipment or machinery in the near future. If you are planning major capital investment, now’s probably the time to do it.
The increase of tax relief on research and development costs will benefit those companies that are developing innovative solutions — judging from the reactions on social media, tech companies and innovative startups were pleased to see this.
And if you’re a small business seeking investment, and not currently listed on the LSE (including AIM and PLUS), making the SEIS permanent may make the job a bit easier. A number of trade sectors are excluded from the scheme, so it won’t benefit all SMEs looking for investment. For more information visit the HMRC SEIS information pages. Along with the combining of cash ISAs with stocks & shares ISAs to form the New ISA (NISA), the Government’s announcement that it will consult on peer-to-peer loans and debt securities offered through crowdfunding may offer some interesting possibilities for small business investors too.
Finally on the investment side, if your business exports overseas, the doubling of lending for export through UK Export Finance will be good news.
The exemption for under 21s from National Insurance is likely make it more attractive to hire young people — a smart move given the shocking number of young people out of work. Also, a new NIC allowance of £2,000, which will take the first £2,000 off the NI bill for every business, was announced and will start in April. However, these well-intentioned effort looks to be undermined by proposed changes to the apprenticeship system: Government plans to provide funding directly to employers rather than through training providers (the current system) has been met with the criticism that it will result in burdensome admin and bureaucracy, and predictions are that, should the new rules go ahead, apprenticeships may drop by 80%.
Other announcements to note were:
- Scrapping the September rise in fuel duty will benefit many small businesses and allow them to plan more effectively for the year.
- Starting 1st January 2015, sellers of goods over the internet will have to charge UK purchasers the UK VAT rate not the VAT of the seller’s home territory. This will be welcome news to UK small businesses (booksellers, for example) that struggle to compete with online retailers like Amazon (based in 3% Luxembourg).
- Corporation tax rate is being cut from 23% to 21% and will go down again to 20% in April next year, but it only applies to companies whose profits are more than £1.5m, so is unlikely to be of great help to our readers. However, business rates will be cut next month, and relief for small companies has been extended to April 2015.
- The £500m of finance set aside for small house builders will be appreciated by the many small contractors out there looking to satisfy the demand for new housing.
Commenting on the budget in the Daily Telegraph, John Cridland, director-general of the CBI, said the budget would “put the wind in the sails of business investment.” John Longworth, director general of the British Chambers of Commerce said:
By making a better business environment his top priority, the Chancellor has recognised that successful and confident companies are the key to transforming Britain’s growing economic recovery into one that is felt in homes and on high streets.
Our view is that, although this Budget could be considered business friendly, and there were a few aspects that will be welcome to smaller companies, and nothing to single out as a real stimulus to growth within the micro and small business sectors.
What’s your opinion on the Chancellor’s budget? Do you think it is “a budget for business”?