How will the 2016 Budget affect small businesses?
The Chancellor of the Exchequer George Osborne delivered the 2016 Budget today, which he promised would be a “budget for small businesses”. Our Managing Director Anthony Fisher has been reviewing Mr Osborne’s announcements to see how this year’s budget may affect SMEs.
One of the bigger announcements for SMEs is that any small business occupying a property with a rateable value of £12,000 or less will pay no business rates from April 2017. Currently, this relief is only available for the value of up to £6,000. There will also be a tapered rate of relief on properties with a rateable value of between £12,000 and £15,000. Mr Osborne has estimated that 600,000 businesses will no longer pay any business tax.
“From April next year, 600,000 small businesses will pay no business rates at all. That’s an annual saving for them of up to nearly £6,000 – forever… That’s a permanent long term saving for all businesses in Britain. A typical corner shop in Barnstaple will pay no business rates. A typical hairdressers in Leeds will pay no business rates. A typical newsagents in Nuneaton will pay no business rates.”
The Right Honourable George Osborne, Chancellor of the Exchequer
A variation in the way that stamp duty on freehold commercial property and leasehold premium transactions is to be calculated is one of the bigger changes in the budget for businesses. Whereas rates have been previously applied to the whole transaction value, the rates will now only apply to the value of the property above each tax band. The new rates and tax bands will be as follows:
- 0% for the portion of the transaction value up to £150,000;
- 2% between £150,001 and £250,000; and
- 5% above £250,000.
This measure will be effective from midnight tonight, meaning that it will be implemented less than 12 hours after the policy’s announcement.
From April 2017, Mr Osborne has announced that there will be two new tax-free £1,000 allowances; one for income from property, and one for providing services or selling goods. These measures will be particularly useful for individuals who occasionally sell their crafts or share their skills, or are using sites like Airbnb to occasionally rent out their spare room.
Many businesses will also be pleased to hear the Chancellor’s future plans regarding corporation tax. Corporation tax has already been cut from 28% to 20% back in 2010, and will be cut back again to just 17% by April 2020.
The budget was naturally not without some criticism from the opposition. Leader of the Labour party Jeremy Corbyn commented that the budget had “unfairness at its very core”, as big corporations had benefited from “mates’ rates” in a series of tax deals.
“There is no doubt that the 2016 Budget has contained a lot of big news for businesses of all sizes, from cuts to business rates for smaller companies to a clamp down on tax avoidance from larger multinationals. It will be interesting to see the effects on the economy once these measures are implemented.”
Anthony Fisher, Managing Director of Focus Insolvency Group