We’re half-way through the Coalition Government, and this was the Chancellor’s 3rd budget.
In a backdrop of fragile business confidence, with businesses saving not spending, the challenges for a private-sector led recovery are high.
Chancellor George Osborne says Budget 2012 “rewards work”, “backs business”, and is on the “side of aspiration”.
The Chancellor started with a wealth of statistics stating growth is increasing, inflation is expected to fall back to the 2% target by the end of this parliament, and the growth in the deficit is falling.
He set out ambitions to create “growth friendly” laws, including a “simpler tax system”. He wants the UK to be tax competitive for business. He wants us to understand what tax we pay and what its used for. He said “I regard tax evasion and aggressive tax avoidance to be morally repugnant”.
He even threw in a few jokes and showed his love of Wallace and Gromit.
The ICAEW Chief Exec Michael Izza stated the budget, “is largely for tomorrow rather than today”.
With pressure to reduce government spending, its likely the giveaways of reducing the headline rate of Corporation Tax and the top rate of income tax are likely to be the last for some time.
So as a small business, I believe times remain tough. This budget hasn’t delivered a windfall to help my business grow, but I remain optimistic and confident in the importance and value of small businesses to each other and the economy.
Budget key points:
- Headline rate of Corpora-tion tax falling faster than planned down to 24% from April 2012.
- Small business CT rate remains at 20%.
- National Loan Guarantee Scheme, £20bn of guar-antees available for busi-nesses.
- Consultation to be launched on cash ac-counting for businesses with turnover less than £77k.
- Enterprise Zones ex-panded, but not into Sussex.
- Personal allowance in-creasing faster than ex-pected, up to £9,205 for 2013/14. 2012/13 rate to be £8,105.
- 50% top income tax rate to drop to 45% from April 2013.
- Child benefits to be gradually withdrawn for those earning over £50k, with no Child Benefit if earning greater than £60k.
Consultations launched which will impact you
The Chancellor confirmed his commitment to key consultations which could have a significant impact on small businesses.
Firstly, a consultation to change the basis of calculating tax for small businesses with a turnover less than £77,000. Currently tax is calculated on adjusted accounting profits. I.e. you calculate your profits based on accounting rules and then adjust them for tax rules. This consultation could remove the need to calculate accounting profits and instead use cash data as a base.
Secondly, the government is continuing to consult on combining Income Tax and National Insurance, as an employer this could be great news as it would simplify the paperwork. It would also help employees understand their tax obligations. But is it possible? Will it cost people more? The true benefits and costs will be found in the detail, and it is likely this potential change is a long way off.
The Chancellor said he wants the UK to be the Technology Centre of Europe, reducing our reliance on the Financial Services Sector.
The government is looking to promote pharmaceutical and scientific industries, energy, and creative media industries.
Brighton is a hub for creative media, and measures such as the expansion of the film tax credit to video games, animations and TV production may assist some local businesses.
Brighton is also looking to become a hub for Eco Technologies, fitting with the government’s aim to promote scientific and energy industries.
The government is going some way to increase incentives for businesses to take up energy efficient technologies, by extending the first year capital allowances on environmentally beneficial plant and machinery.
The first year 100% capital allowances for businesses buying low emission cars is extended for another 2 years.
New technologies are added to the Enhanced Capital Allowances to improve their uptake. But the Chancellor gave a warning to renewable energy schemes hoping to take advantage of FITs—they need to be “fiscally sustainable as well as environmentally