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The Emergency Budget and what it means for small businesses

Added: 2010-06-23 12:26:52.0

The government announced its emergency budget yesterday and it proved to be mostly positive for small and medium sized businesses in the UK.

To summarise, the main changes impacting businesses include:

• VAT will rise from 17.5% to 20% from January 4th, 2011.  
• The threshold at which employers start to pay National Insurance will rise by the rate of inflation plus £21 per week.
• Corporation tax for small businesses will be cut to 20% (down from 21%)
• Corporation Tax for large businesses will be cut in 2011 to 27% (down from 28%).  It will then continue to fall by 1% per year until it reaches 24%.
• The government will consult on phasing out the default retirement age.
• For the next three years, new businesses set up outside London, the South East or the East of the UK will escape the first £5,000 of employers' National Insurance payments on each of their first ten employees.

It is likely that most businesses in the UK will feel pleased with the Budget, certainly compared with the previous Budget announced by the former government earlier this year.  For many business owners, it will be the VAT increase that will be the source of discontentment as they prepare to go forward into 2011.

When the VAT was lowered at the end of 2009, many businesses found the whole exercise a logistical nightmare.  Many who sell to consumers will also fear that the rise may have an adverse affect on their profits.

However, small businesses in particular will benefit from the lower tax rates; with the Treasury forecasting that it cut firms’ tax bills by a total of £3.8billion over the next 4 years.

How do you feel about the new budget?  DO you feel that it’s a step in the right direction?  Or are you worried about the impact of the VAT rise, both logistically and how it will affect your profits?



The content of this blog is not legal advice and should not be relied on as such, or used instead of seeking legal advice.

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