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Monthly Archives: March 2013

2013 BUDGET GIVES HELP FOR BUSINESS, BUT NOT YET

The Chancellor George Osborne made his 2013 budget statement against a background of continuing economic gloom. With no money to spend any give-aways had to be paid for by either tax increases, squeezing government spending or by reducing tax avoidance. The Chancellor was keen to trumpet the fact that employment was up and that interest rates continued at an all time low, but had to admit that the growth forecast for the coming year would be 50% lower at 0.6%. This means that tax receipts will be lower than forecast and consequently it will take longer to reduce the budget deficit.

The Chancellor therefore needs to boost the economy without increasing government borrowing. To do this he has therefore announced that additional savings in government department spending will be used to inject £3b into infrastructure spending during 2015-16. In conjunction with the “help to buy scheme” and the mortgage guarantee for home buyers he hopes to boost the construction industry, but how soon we will see the positive effects from this impetus is unknown.

He had already been announced that the full rate of corporation tax was being reduced to 21% from April 2014 and this is being further reduced to 20% from April 2015, meaning that corporation tax for small and large companies will be the same rate. This is primarily aimed at attracting multi-nationals to the UK (or from deterring them from leaving the UK), but the change will also mean that there will no longer be a disincentive from marginal corporation tax rates.

Although most of the budget provisions had been flagged in advance, George Osborne managed to spring a surprise.  The new employment allowance means that from April 2014 all employers can deduct £2,000 from their employer’s national insurance liabilities. This will be welcomed by small business owners, many of which will pay no employer’s national insurance contributions. But if the Chancellor really believes that this will boost employment why is he waiting for another year?

As previously announced the income tax basic personal allowance is being increased to £9,440 from April 2013 and this will be further increased to £10,000 from April 2014. Whilst this will be advantageous to most employees and the self-employed it is being paid for by reducing the level at which you begin to pay the 40% tax rate. So if you were already close to the higher rate threshold it is unlikely to be of any advantage. Owners of small limited companies should therefore continue to take their remuneration as a mix of a salary equal to the personal allowance and the remainder as a dividend.

The Chancellor has continued his policy of reducing government spending whilst trying to boost private sector employment, but we will have to wait until at least 2014-15 to see whether the NIC employment allowance and boost to the construction industry is enough to stimulate the economy.  So whilst Mr Osborne may get some good headlines why does he make the changes now to give some immediate help for small business owners?

HSBA Market Harborough

Many thanks to everyone who attended my talk on business expenses at the HSBA meeting at Market Harborough Innovation Centre last Tuesday. There were lots of interesting questions so hopefully it was useful.

If anyone would like a copy of the handouts please email me at [email protected]

 

Howell & Co has been assisting Online Profiling Ltd since 2005. They couple efficient service with good practical advice and are always extremely helpful and professional.  
Trevor DawesManaging DirectorOnline Profiling Ltd

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