On March 16th 2016, Chancellor George Osborne delivered the Budget to Parliament; below are the key announcements that could impact small and medium-sized businesses.
Announcing that the Office of Budget Responsibility had adjusted down its growth forecast for the next five years, George Osborne predicted that the economy will grow by 2 per cent this year, by 2.2 per cent in 2017, and by 2.1 per cent until 2020. But this, he said, was dependent on the UK deciding whether to stay in the EU or not.
From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100 per cent relief is only available if you’re a business that occupies a property (e.g shop or office) with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000 meaning 600,000 businesses will pay no rates.
Employers will pay National Insurance on pay-offs above £30,000 from April 2018
From April 2018, employers will need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due. For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.
Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018
Currently, self-employed people have to pay Class 2 National Insurance contributions (NICs) at £2.80 per week if they make a profit of £5,965 or over a year. They also have to pay Class 4 NICs if their profits are over £8,060 per year. From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs. Since paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits; after April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.
New stamp duty rates for commercial property from 17 March 2016
The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band.
The new rates and tax bands will be 0 per cent for the portion of the transaction value up to £150,000; 2 per cent between £150,001 and £250,000, and 5 per cent above £250,000.
Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.
Stamp duty rates for leasehold rent transactions will also change, with a new 2 per cent stamp duty rate on leases with a net present value over £5 million.
More funding to protect homes and businesses from flooding
Funding for new defences including in Leeds, York, Calder Valley and Cumbria and for maintenance of existing defences.
This will be paid for by Insurance Premium Tax, a tax on insurers. The standard rate will rise from 9.5 per cent to 10 per cent.
HS3 between Leeds and Manchester
HS3 is the planned east-west rail between Manchester and Leeds. £60 million has been announced to develop plans to cut journey times to around 30 minutes between Leeds and Manchester, as well as improving transport connections between other cities in the north.
£80 million to give Crossrail 2 the go-ahead
This will be used to continue planning for Crossrail 2. The proposed Crossrail 2 route will connect South-West and North-East London, increase tube capacity and reduce the pressure on Victoria and Waterloo stations.