In today’s announcements, George Osborne reported that “Britain is open for business” with SMEs set to benefit from cuts to Corporation Tax and a set Annual Investment Allowance of £200k. However, an increase in the national living wage next April “could hit some small businesses hard in certain sectors,” warned Mike Cherry, Policy Director for the Federation of Small Businesses (FSB).
For businesses, today’s budget contained a mixed bag of challenges and as many SMEs continue to develop their business plans what difference will it make? The key points are summarised below:
- The UK economy grew by 3% in 2014, faster than any other advanced economy and is forecast to grow by 2.4% in 2015, 2.3% in 2016, and 2.4% in 2017.
- The Office for Budget Responsibility (OBR) predicts another 1m jobs will be created over the next five years, George Osborne is targeting full employment and wants to create another 2m jobs.
- The budget deficit will fall to 2.2% of GDP in 2016-17, 1.2% in 2017-18, 0.3% in 2018-19.
- Government will run a surplus of 0.4% of GDP in 2019-20 and 0.5% in 2020-21 according to forecasts.
- Public sector pay rises will be capped at 1% per year until 2019.
- There will be a new National Living Wage of £7.20/hr from next April which will be compulsory for over 25s. This will reach £9/hr by 2020.
- Tax-free personal allowance will be raised from £10,600 to £11,000 next year.
- Corporation Tax is currently 21%, the joint lowest rate in G20, and it will be cut to 19% in 2017, and then 18% from 2020.
- Fall in NI contributions for small businesses, with £3k employment allowance. This means that a small firm can hire four full time employees on the National Living Wage and pay no national insurance.
- Annual Investment Allowance will be set at £200k permanently from January 2016.
- The number of apprenticeships has already doubled to 2m; this will increase to 3m.
- Apprenticeship levy on large firms, those firms which train apprentices receive more money than they put in.
- 18-21 year olds must “earn or learn” and will lose their automatic entitlement to housing benefits.
- From 2017, working parents of 3-4 year olds must work if they want universal benefit but will receive 30 hours of free childcare a week compared to 15 hours currently.
- Government consulting on new ISA-style pension where savers pay tax on the income they put in, not when they take it out.
- New 8% tax on banks’ profits from January 2016.
- Fuel duty has been frozen for another year.
- Power to set Sunday trading hours will devolve to counties and mayors in England.
- Working-age benefits to be frozen for four years - including tax credits and local housing allowance, but maternity pay and disability benefits exempted.