Posted on: 19 March 2015

Budget 2015

As we are often reminded, the general election is only round the corner, so yesterday’s budget was never going to be radical.

But it did include some announcements that are very relevant for small businesses across the UK. Here’s our summary.

Personal taxation

George Osborne announced that the annual tax return will be scrapped by 2020, being replaced with ‘digital tax accounts’. Small businesses and individuals will be able to use their smartphone, tablet or computer to submit their accounts and pay their tax at any time in the year.

The switch isn’t likely to start until the beginning of 2016, at which point businesses and individuals will start being able to link their accounting software and their bank accounts to the digital tax account.

This will save many small business owners time and money on preparing and submitting their annual tax return.

It may be that your business could benefit from an accountant in the run up to these changes. Read our article How to find a good accountant

National Insurance

The Chancellor announced that Class 2 National Insurance contributions for the self employed will be abolished in the next Parliament. This means that self employed people whose profits are more than £5,885 a year will no longer have to pay £2.75 a week in Class 2 National Insurance contributions. This doesn’t affect higher earners who will still have to pay Class 4 National Insurance contributions. However, it will take until later this year for any reforms to take place as a consultation on the detail has to happen first.

In addition, National Insurance contributions for those aged under 21 will be abolished from this April, with contributions for young apprentices disappearing from April 2016.

Business rates

Mr Osborne announced that four UK regions will be allowed to collect all of the business rates paid by local restaurants and shops rather than having to pay half of it to central government. Greater Manchester, Cheshire East, Cambridgeshire and Peterborough will start a trial in April as part of the Government’s devolution of powers to boost the ‘Northern powerhouse’.

While some see this as a way to help local businesses thrive, others are concerned about local authorities abusing their position.

Connectivity

Not all businesses have accessibility to good quality broadband. Yesterday the Chancellor announced that up to £600million will be allocated to freeing up spectrum currently used by broadcast TV for mobile services. In addition, the Government plans to provide better broadband to remote parts of the UK through subsidies for superfast-capable satellite services. SMEs in urban areas should also benefit from the Government’s expansion of the allocation of super-fast broadband vouchers.

With some 45,000 small businesses across Britain still using dial-up internet1, improving connectivity is designed to support growth of SMEs across the country.

Other points to note

For small businesses

  • Corporation tax for businesses making more than £300,000 profit will be cut to 20% from 6 April.
  • A planned increase in fuel duty will not go ahead to support small businesses and individuals filling up at the pump.
  • There are plans to invest £11m in creating technology hubs for digital sector entrepreneurs in Sheffield, Leeds and Manchester.
  • Automatic gift aid for charities will be extended from £5,000 to £8,000.
  • Farmers will be able to average their income over five years for tax purposes – something that will be welcome given the volatility of food prices.
  • A consultation to give local newspapers tax support was announced to help sustain these important sources of information for local businesses and communities.
  • Business being invested in by enterprise investment schemes or venture capital trusts will have to be less than 12 years old when they get their first investment.
  • The current annual investment allowance of £500,000 is set to expire on 1 January 2016 - Mr Osborne said that the new level will be announced in the Autumn Statement.
  • An extra £7.5million will be put into UK Trade & Investment activities in China in 2015-16 to support healthcare, life sciences, advanced manufacturing, transport and financial services.

For individuals

  • The National minimum wage will increase to £6.70 this October.
  • The personal allowance will increase to £10,600 on 6 April this year. It will then increase to £10,800 in April 2016 and £11,000 in 2017-18.
  • The higher rate tax band is to rise from its current level of £42,385 to £43,300 in 2017-18.
  • From April 2016, the first £1,000 interest earned on basic-rate taxpayers’ savings is tax free. The first £500 is tax free for higher-rate taxpayers. The Chancellor described this as the Personal Savings Allowance.
  • Flexible ISAs were introduced by the Chancellor, which he said would mean that if you take money out of an ISA, you can put it back in in the same year as the withdrawal without losing your tax free entitlement.
  • A report into how deeds of variation are used to avoid inheritance tax will be published in the autumn.
  • In a new Help to Buy ISA, for every £200 a first-time buyer saves, the Government will add £50 to the pot, up to £15,000. This ISA will be available on houses worth £250,000 or less, except in London where it will be available on houses worth £450,000 or less.
  • The pension pot lifetime allowance will be reduced from £1.25million to £1million from next year.

[1] http://www.telegraph.co.uk/sponsored/business/sme-home/news/11113934/slow-broadband-effects-business.html

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