On 16 March 2016 George Osborne presented the government’s Budget for the next fiscal year.
The Chancellor announced that Britain’s economy is set to grow faster than any other major advanced country in the world and that our labour markets are reporting the highest employment figures in history. In spite of the Chancellor’s comments that the British economy is stronger and more resilient following the financial crisis of 2008, he warns that financial markets are turbulent, productivity in the West is low and the outlook for the economy is weak. The British economy is forecast to grow by 2.2pc this year, which is less than previously anticipated; therefore, the government has introduced a number of tax benefits for small and medium-sized businesses in an attempt to promote further growth. Your HR Lawyer has identified the key points affecting the employment sector, which are set out below:
Corporation tax will be cut to 17% by 2020 (currently 20%);
Capital gains tax will be cut to 20% from 28% for top rate taxpayers;
Capital gains tax 18% to 10% for basic rate taxpayers;
Small business rate relief will increase from £6,000 to £15,000;
Business rates will be linked to CPI (the official measure of inflation);
Tax on North Sea oil is abolished;
Introduction of a tax on sugar in fizzy drinks.
Extra funding to ensure every primary and secondary school will be become an academy by 2022.
Introduction of two tax free allowances of £1000 each in relation to trading and property income.
Reduction of the commercial property stamp duty for properties with a rateable value of £12,000 or less;
Properties valued at between £12,000 and £15,000 also qualify for tapered relief from April 2017.
As with any budget, there are always winners and losers and Your HR Lawyer believes that small businesses will reap the biggest rewards, benefiting simultaneously from increased tax relief, pledges to cut red tape bureaucracy and a reduction to the commercial property stamp duty. An estimated 600,000 firms with a rateable value of £12,000 or less will be lifted out of rates completely.
The Chancellor also announced that by 2020, business rates will become pegged to the consumer prices index, instead of the retail prices index, which is a higher measure of inflation. This will be a winner with the retail industry.
Additionally, the reduction in corporation tax has been branded as an attempt to promote further investment in the hope that companies will invest in technology and increase productive output. In our previous article, investment was outlined as an essential element for the future sustainability of businesses adjusting to greater overheads following the introduction of the National Living Wage, which comes in later this week.
However, the budget wasn’t all rosy for small and medium-sized organisations; particularly those working in the public sector and in welfare rights. Labour has vehemently challenged the budget, criticising the Capital Gains Tax as benefits “for the wealthy” and stating that the cuts to disability benefits were “morally reprehensible”. The Personal Independence Payments cuts and other cuts to disabilities amount to a third of the revenues raised by the Conservative government. We may therefore see a further shrinking of the third sector.
Finally, the Transport Insurance Premium Tax rise means that insuring company vehicles will be more expensive and many felt that the Chancellor didn’t go far enough to ensure that large international corporations will pay an equal share into our tax system. Your HR Lawyer will continue to monitor the upcoming changes and the effect upon you and your business, so watch this space!