SME owners welcomed the Chancellor’s plans to reduce corporation tax to 19% by April 2017. Moreover, the Tories plan to further reduce this tax to 18% in 2020. As well as the unexpected drop in corporation tax, the Annual Investment Allowance (AIA), which was set up to help boost capital investment, has been permanently set at £200,000. Although the rate has dropped significantly from £500,000, preserving the allowance indefinitely, albeit at a lower rate, will remove some economic uncertainty.
From April 2016, new changes will see employers pay their employees that are aged 25+ at least £7.20 per hour. This will increase again to £9 per hour by 2020. Although this could be considered problematic for small business owners (it is predicted that 60,000 people will lose their jobs), George Osborne has assured the public that 1.1m jobs will be created due to the overall changes to the budget.
Following on from the changes in the national living wage, Osborne’s plans to increase the new Employment Allowance to £3,000. This means that small firms will be able to employ up to four people full time without having to pay national insurance. This will help the SMEs to reduce their costs of wages will counterbalancing the new national living wage.
Although a few changes were made to benefit small firms, there were a few underlying issues that Osborne skirted over: the business rates and rentals were not mentioned, and neither was the late payment issue that is disproportionately affecting small businesses.
If you would like to learn more about how your small business will be affected by new changes, contact Aston Black today.