The Chancellor George Osborne has outlined his budget for the year ahead. Highlighting the move towards a budget surplus is on track as he told the House that Britain has the most robust economy in the world.
With slower growth in emerging markets and some global financial uncertainty, the Chancellor pointed out that the recent Office for Budget Responsibility (OBR) statements about slowing UK productivity and the growing number of countries with negative interest rates would have an impact on UK economic figures until the end of the current parliament. He also mentioned it was important to continue with the long term economic plan outlined at the start of the present parliament.
He went on to mention that the OBR has lowered economic growth predictions to 2% in the year ahead which in their view is dependent on the UK staying in the European Union.
So what came out of the 2016 budget for UK businesses?
- Unemployment is the lowest it’s been since 1974 with the OBR predicting more than a million new jobs in the year ahead. This strong performance has been supported by growth in the services sector and new technology businesses.
- Annual growth targets have been revised down for the next five years to as low as 2.1%.
- Micro-Entrepreneurs are to get more help with new tax free allowances with very little red tape to enjoy the benefits. The Chancellor called it a new benefit for the “digital age”.
- Small business rate relief rises from £6,000 to £15,000 providing a number of small businesses across the UK with a zero small business rates bill for the first time.
- Commercial property stamp duty has been redefined to take many businesses out of the tax threshold all together.
Taking a closer look at today’s changes, here is a breakdown of the main areas affecting UK businesses as a result of the Chancellor’s announcements today:
Transport companies get a boost
Fuel duty has been frozen for the 6th consecutive year helping not only motorists benefit from lower fuel costs but the many small transport businesses too. With the explosion in online sales and the need for cost effective delivery services, this budget message will be very popular with both large and small business alike.
More money in your pocket
The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017. In addition the tax-free personal allowance to rise to £11,500 in April 2017 helping move more low paid people out of the tax system.
Capital Gains Tax is set to be cut from 28% to 20% and from 18% to 10% for basic-rate taxpayers. Providing clearer benefits for savers.
The government announced Class 2 National Insurance contributions would be abolished, saying it would give a tax cut of more than £130 to three million self-employed workers from 2018.
Insurance costs increase for the self employed
The Chancellor announced a 0.5% rise in insurance premium tax which will mean higher charges for many of the 3 million self employed and independent consultants that need to protect themselves with adequate insurance.
Businesses benefit from tax changes
The annual threshold for small business tax relief will be raised from £6,000 to a maximum of £15,000; this means thousands of firms across the UK will benefit from lower tax bills.
Commercial stamp duty has been changed to a new 0% rate on commercial property purchases up to a value of £150,000. It will be 2% on the next £100,000. There is a 5% top rate on properties above £250,000. A new 2% rate for high-value leases with a net current value over £5m was announced. These changes will be effective from midnight today (17th March 2016).
The headline rate of corporation tax which is currently 20% is set to fall to 17% by 2020.