Yesterday’s Budget was particularly relevant for the small business world. Here we break down the key points that you need to be aware of:
Cuts to Business Rates
Business rates? These are a tax on non-domestic properties that would apply to shops, offices, pubs and holiday rental homes.
- Rate relief will be doubled from £6,000 to £12,000 by 2017
- Any business that occupies a property worth less than £12,000 will pay no rate at all
- There will be a tapered rate relief on properties that are worth up to £15,000
- Changes will mean that 600,000 small firms will not be paying business rates
Corporation Tax and Capital Gains Tax Reductions
Corporation Tax? These are taxes on profits made by businesses in a certain period. Capital Gains Tax? This is a kind of tax levied on profit from the sale of a non-inventory asset.
- Corporation Tax will fall to 17% by April 2020
- Capital Gains Tax will be reduced from 28% to 20% for the higher rate earners
- For lower rate earners this will go from 18% to 10% from the start of next month.
Class 2 National Insurance Removed
National Insurance? This is a list of contributions paid by workers and employers which go towards funding state benefits, such as pensions, illness and unemployment.
- Class 2 National Insurance will be removed for self employed by 2018
- Now you will only have to pay one type of National Insurance if you make a £5,605 profit per annum
Extension of Entrepreneurs Relief
Entrepreneurs Relief? This is a government scheme that was set up to help provide people selling their business a reduced rate of capital gains tax. This scheme can be used by business individuals such as sole traders and limited company shareholders.
- The relief will be extended into unlisted trading companies
- Investors will only have to apply a 10% rate of Capital Gains Tax
- An existing £10m has been added by the chancellor on top of existing amount
Tax Reductions on Sharing Economy
The Sharing Economy can be understood as a system built around the system of sharing resources. Companies such as Airbnb, Zopa and Netflix would all be considered a part of the Sharing Economy.
- Two new tax free allowances will be introduced by April 2017
- Both will be worth £1,000 each
- One will concern the selling of goods and services
- The other will be be for income on any property you let out
Devolution is the process of whereby power is transferred from central government and local councils are given more freedom to dictate their own policies.
- Devolution will spread towards East Anglia, Greater Lincolnshire
- This will give local leaders the ability to dictate regional economic policies
This Budget has already been hailed as a triumph for small business. Director of the FSB Mike Cherry stated that:
“In a budget constrained by both the need to reduce the deficit and economic outlook, the Chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates.”
We hope that this is a Budget that you can feel real benefits from. If you are interested to read more on small business issues then why not look at our dedicated blog page here.