While it is important, in the Chancellor’s words, to ‘not burden our children and grandchildren‘ does that mean a financial burden must be shouldered by the current working population, the now rather than the next generation?
Millions of Brits who established small and medium sized enterprises (SMEs) before 2007, who have weathered the storm brought on by the financial crisis, surely deserve the same level of TLC being lavished upon the younger generation.
This week our panel of experts takes a close look at the Chancellor’s 2016 Budget to assess the benefits and drawbacks of Osborne’s plans on the small and medium sized business owner.
Andrew Hubbard, tax partner at RSM, says that while no major changes, positive or negative, will follow as a result of this year’s Budget, government proposals are afoot which will affect business owners in the not too distant future.
Alanzo Seville, adviser at Capricorn Financial Consultancy, considers the implications to changes for employee benefits.
Carl D’Ammassa, group managing director of business finance at Aldermore, is pleased with the Chancellor’s plans for SMEs and discusses the increased access to finance being offered to the small business owner.
Andrew Hubbard is a tax partner at RSM, formerly known as Baker Tilly
Small businesses will not see their lives transformed by the Budget. The modest increases in the rate bands will mean a slight reduction in the income tax which sole traders pay, but for those operating in corporate form the increases in dividend tax rates from 6 April will be an unwelcome change. They also need to watch for the fact that if they take loans from their companies the tax which has to be deposited with HMRC until the loan is repaid increases from 25% to 32.5%.
HMRC’s digital strategy, which will require businesses to keep records electronically and make quarterly reports to HMRC, will have a major impact in this sector. We had hoped that the government would publish more details of how this is going work with the other Budget papers, but to date nothing has appeared. All businesses will need to monitor developments in this area as it could require them to make fundamental changes to the way in which they keep track of financial performance.
Further change is on the cards. The Office of Tax Simplification has proposed radical changes to the way that small businesses are taxed, including allowing sole traders a measure of limited liability and taxing small companies on a “look through” basis, under which owners are taxed directly on the profits of the company as they arise. The government has endorsed these changes and we can expect some of them to be implemented over the coming years.
So in summary. Nothing particularly exciting or worrying for small businesses this year – but change is on the way.
Alanzo Seville is an mortgage adviser at brokerage Capricorn Financial Consultancy
This year’s Budget was a mixture of good and not so good for small business owners. It was a thumbs up for lowering the rate of Corporation Tax, cutting business rates, reducing the rate of Capital Gains Tax, reforming the Stamp Duty Land Tax for non-residential property and cutting employer National Insurance Contributions. The freeze in fuel duty should also get a mention as this helps all motorists, not just business owners keep their travel costs under control.
The National Living Wage and National Minimum Wage are a step in the right direction but when you look at the cost of living in certain areas (the South East and London in particular) the increase may have little impact in the day-to-day lives of employees. For other areas of the country where market conditions are tougher and the cost of living is lower, the increase could have a negative impact on micro businesses who employ a handful of staff.
There were a few areas of concern though. Shared Parental Leave and Pay to working grandparents, is one of the many proposed policies which will be explored by way of consultation later this year. In principle the majority of small business owners want to support their staff during the early years of stating a family but this is best achieved if the business is in good financial health and has the resources both in terms of finances and personnel, to provide the required support.
Carl D’Ammassa is group managing director of business finance at Aldermore
It’s fair to say that George Osborne’s Budget was very positive for SMEs. Firstly, he announced the tax threshold for small businesses will rise to £15,000. This will provide a much needed boost to more than half a million SMEs right across the UK.
SMEs continue to be the driver of economic growth, but at a time when the economy faces significant threats, anything that can be done to provide added relief to small businesses is a welcome shot in the arm. From our point of view, the majority of our SME customers are based outside London and the South East, where local economies vary significantly compared with the national picture, so this is particularly welcome.
Additionally, small businesses rejected for finance by high-street banks, will be pointed towards alternative lenders. We consistently hear from small businesses who are unable to access the finance they need on the high street. The Chancellor announced SMEs will be matched with alternative lenders after the rejection of an application. This could have a significant impact on the ability of small businesses to access the funds they need to grow.
A further benefit for SMEs was the reduction of Capital Gains Tax, which provides added incentive to those seeking to build and grow small businesses across the UK. It is vital the Government continues to provide support to both existing and growing small businesses but also builds incentives for micro businesses and sole traders to grow their activity in the long term.
