Well Mr Osborne has spoken. There's plenty of analysis of the coalition's emergency budget elsewhere. Nick Robinson says 'age of austerity' and Robert Peston says...well, something I didn't quite catch.
As promised, I've been listening to it all and reading the press releases, so you don't have to.
Here are some of the areas I think will affect small businesses like you and me.
Value Added Tax
VAT up to 20% (from 17.5%): - the rise from 4th Jan 2011 (after the New Year bank holiday) may persuade some to register for VAT. Getting 20% back off business purchases is a pretty attractive proposition with a rate this high.VAT Flat Rate Scheme: - because the standard rate is going up, so is the flat rate. For example the Film, radio, TV and video category is currently 10.5%. This will go up in January to 13%. Read more about the flat rate changes: http://www.hmrc.gov.uk/budget2010/bn45.htm
(The reduced rate of VAT will be unchanged at 5%, by the way. And exempt items like kids' clothing and newspapers will remain exempt.)
Income tax and National Insurance
Personal allowance:- individuals and sole traders will be allowed to have an income of £7,475 before paying any tax (up from £6,475). The rates of income tax stay the same.National Insurance: sole traders' class 2 NI contributions might be unchanged at £2.40 per week. They'll come to a view about it in the autumn. But class 4 NI will be 9% (up from 8%) and the top rate will be 2% (up from 1%). Both from April 2011.
If you're operating as a limited company, class 1 NI on an employee's salary is 12% (up from 11%) and the employer's contribution is 13.8% (up from 12.8%), but with a 'tax holiday' on the latter if you set up from today, and if you employ fewer than 10 people, and set up outside London and south-east. (I'm still checking thresholds and other details on this...so don't quote me...will post again on this.)
Corporation tax for small businesses
Also for limited companies - the small business rate of corporation tax will be reduced to 20% (from 21%). In fact this is the first time I remember a Chancellor talking about the small business rate in a budget speech. He also said he recognised the importance of helping the smallest of businesses. Collectively they (we) are a significant force.Capital allowances
This year you've been able to put up to £100,000 of capital equipment against your turnover to reduce your tax bill. This is called the Annual Investment Allowance.The cap has been reduced to £25,000 from next year - a reduction of 75%. This seems draconian, but most people I work with will not spend that much on capital equipment in a year. And even if you did you can spread the costs above that cap at a rate of (typically) 20% until April 2012, when it will go down to 18%.
Still checking the small print. If you want to have a look yourself (with a stiff drink close at hand*) try the treasury website:
http://www.hm-treasury.gov.uk/junebudget
Let me know how you feel the budget will affect you and your business. And feel free to point out anything I've missed.
Now - time to go out and enjoy the sunshine!
*I suggest cider or perry - the planned increase in duty has now officially been abolished
Recent Comments