Posted on: 17 March 2016

In a report labelled a “budget for small business”, the Chancellor of the Exchequer, George Osborne today revealed his eighth budget plan for the UK.

Amongst some of the changes to be made are business tax relief increases, reduction in commercial stamp duties and a “crack-down on corporate tax avoidance” as stated by the Chancellor. However, small businesses will see some increases in taxes as the Insurance Premium Tax rate increases for the second time in less than a year. 

In a budget designed to help small enterprises, we take a look at the key financial announcements that may impact your small business:

Business Rate Relief

Mr Osbourne announced that he would be “more than doubling” the business rate relief for small businesses in the UK.

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently the relief is available to businesses that occupy a property of £6,000 or less. The chancellor predicts that by 2017 around 600,000 businesses will pay no rates, saving up to £6,000 annually. 

Commercial Stamp Duty

Under the new budget, the way that stamp duty on freehold and leasehold commercial properties is calculated will change. The rate is due to be lowered to 0% for purchases up to £150,000, 2% on the next £100,000 and 5% on the top rate above £250,000, effective as from today. 

Corporation tax to be cut

The Chancellor also announced that corporation tax currently stands at 20% and under the new budget is forecast to fall to 17% by 2020. This comes after the announcement of plans to raise £9bn by closing corporate tax loopholes and tax minimisation schemes. 

Insurance Costs Increased 

George Osbourne has increased the Insurance Premium Tax from 9.5% to 10%. The rise is due to take effect from October 2016 and is the second increase in less than a year following from the increase from 6% to 9.5% in the Summer budget last July. This is a tax charged on general insurance premiums including building, contents and motor insurance.

Osbourne announced that the extra £700m raised by the increase would be spent on flood defences and supporting those affected by recent flooding.  

Some self-employed NI contributions to be scrapped

From April 2018, self-employed people will no longer have to pay class 2 NICs at £2.80 per week (this currently applies for profits of over £5,965 per year) and will only have to pay one type of National Insurance, Class 4 NICs (currently of profits over £8,060 per year).

Digital Tax Breaks

The announcement of digital tax breaks worth £1,000 each will be available for “micro-entrepreneurs” who sell services and items online and will apply from April next year. This means that individuals with online trading or property income will not have to declare or pay tax on the first £1,000 they earn from each source.

Other key points:

  • Employers will pay National Insurance on pay-offs above £30,000 from 2018
  • Fuel duty will be frozen again in 2016-17
  • Freeze in beer duty to help pubs
  • Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home
  • Every school will be an academy by 2022 and longer school days for 25% of secondary schools
  • Tax on soft drinks effective April 2018
  • Boost to UK’s “Northern Powerhouse” including works on the M62 and £75m to improve road links in the North Pennines
  • Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

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