Electric Trainer

"Calm man does something sensible" - a budget for small businesses?

Well there's a turn up for the books. A budget that was largely welcomed by the Federation of Small Businesses (FSB), and even described as 'clever' in an FT headline - though this was subsequently re-written to sound more wary.

The 'clever' epithet originally came from the CBI who also described Mr Darling's last budget before the election as 'modest but helpful'. Gosh.

You knew he'd done something clever when the British Bankers' Association tweeted that they were "not convinced on the "small business credit adjudicator"". So one of the most hated organisations in the UK is unconvinced by something that's going to threaten their hold on business lending. Excellent.

But what about all that nitty gritty stuff we cover on our workshops for freelances and small businesses?

We've known about the one major change to income tax since December - the new 50% tax rate for income over £150K. This will affect 1% of earners in the UK, so let's not dwell.

Away from the headlines about first time buyers and cider you can find some nods in the right direction for self-employed people and small businesses.

If you're wanting to buy a lot of kit for your new business, Mr D doubled the annual investment allowance to £100K. So this new-ish allowance is now even more attractive.

If you have a shop front or business premises paying business rates, you may be one of 345,000 that won't have to pay them for one year from October. (It's based on rateable value.)

The one threshold which seems to be going up is VAT. You can now wait until you have an annual turnover of £70,000 before you have to register for VAT.

On the down side, the upper limit for using the VAT flat rate scheme has now been stuck at £150,000 for three years.

Lots of small businesses have been complaining about the lack of access to loans, with the suspicion that the banks are hoarding money unnecessarily. The Chancellor seems to have lost patience - hence this idea of a "small business credit adjudicator".

Goodness knows how this will work, but speaking as someone who runs a small business, this is the first budget I can remember where there's an acknowledgement that small businesses actually exist.

Tucked away in the Treasury's budget documents is a description of better online support for SMEs, a personalised version of Business Link, and ways of "providing better access to relevant tax guidance and flexible tax payment plans to help businesses manage their cash flow". 

It almost sounds, well...sensible.

Before we get too carried away, it's worth reminding ourselves that lots might be undone with a change of government.

And yes - we might have another budget in June/July.

So if you're one of our trainees you know where to go for the updated handouts. If you're not, there's always the free stuff.

I nearly forgot...prize for the best budget headline? The Guardian's "The Good, The Bad and the Scrumpy".  

Allowable expenses and the naked presenter

We often have a long discussion during "finance for freelance" workshops and "setting up as a sole trader" courses about what's allowed as a business expense.

People who have only ever been employed are frequently dismayed that there appear to be no 'rules' - just guidelines.

I've never had a problem with this. Every business is different, and there needs to be flexibility in the system.

Once in a while a test case appears which suddenly brings the guidelines into focus. This week we have had one of those moments - of interest to everyone in the media industry who has asked me if they could put their clothes and hair-dos against tax.

Well you can't. Except perhaps to keep especially warm and cozy.

You probably spotted this already, thanks to the incendiary use of the word 'naked' in the story tags. Search engines seem to love that.

If you want to read about the tribunal ruling try the Times or the Indy or the Daily Mail.

Or Wales Online (yes folks - Sian Williams is Welsh.)

Of elections and budgets

As we head towards the end of another financial year it's time to consider what's on the horizon for small businesses like you and me, and how much Ryman's makes on those portable metal file holders we keep all our paperwork in.

First off, there's a budget coming up, which always means a flurry of activity for me as I update all the handouts for our business skills training. 

This year promises to be handout hell, as this budget will also be the last before a general election. The chances of some kind of emergency budget afterwards are high. Two budgets! Will my laser printer be able to cope?

Recent trainees will know I've been trying to re-invent my 'tax bathtub'® - the graphic disaster that is my attempt to show income tax in visual form.

The bathtub for 2010-11 has needed re-plumbing to allow for the new top rate of 50% for income over £150,000. But it also needs to spring a leak at the right moment to start wiping out the personal allowance once you have over £100,000 of taxable income. 

Tax Bathtub 2010 11

View more presentations from David Thomas.

It's not pretty, graphic-wise. (And all this just to represent the top 2% of UK earners.)

We've known about this for months now. So is there likely to be anything new in the pre-election budget?

Probably no more surprises. Mr Darling has no money to play around with and won't want to frighten the horses before we all go to the polls.

So what might happen when we've had the election and frightening horses is back on the agenda?

One view is that VAT may go up - to 19% or 20%. This is because VAT is one of the two main ways the Treasury collects our money, the other being income tax.

The 50% top rate of tax will probably stay for a while, whoever gets in. Watch someone reduce it just before the election after this one, in a vote-attracting gesture.

More likely: the point at which people pay taxes will not move up in line with inflation. In other words the thresholds will stay much the same, slowly putting more people into higher tax bands as their income rises slightly.

For those of us who are limited companies the Tories say they would reduce the small biz rate from 21% to 20%, and the mainstream rate from 28% to 25%. Keep an eye out for any pronouncements from other parties, but don't hold your breath.

Whatever happens, you'll get all the latest on forthcoming courses, and via the accompanying downloads on our site. And don't forget there is free stuff on the site as well if we don't see you on one of our workshops.

Happy Easter!