Emergency Budget: Tax breaks for small businesses
By Jonathan Moore
Small businesses’ corporation tax will be reduced to 20% next year, the chancellor announced in his Budget today.
George Osborne also said corporation tax would be cut by one per cent each year for the next four years, bringing it from 28% down to 24% by 2014/15.
New businesses outside London, the south-east and the east will be exempt from the first £5,000 of national insurance contributions for the first ten employees in those businesses.
He also said they were committed to important regional development projects in areas where public sector employemnt was at its highest.
The reductions in tax have been welcomed by business groups, though there are concerns about the rise in VAT and that rises in the national insurance contribution scheme (NICS) were not completely reversed.
The Federation of Small Businesses (FSB) said the reduction in small companies’ tax and exemption of new businesses from NICS were welcome, but that the government should have done more to help business.
“The measures announced in the emergency Budget will go a long way to reducing the deficit and will please the 93% of FSB members who called for a clear plan on tackling the country’s debt,” said FSB chairman John Walker.
“The increase in VAT to 20% will, however, hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost.
“We welcome moves to give a national insurance holiday to start-up firms, but are concerned that with 70% of firms operating below capacity, those businesses already trading will not be helped. We need to see a full reversal of NICS increases to fully offset the ‘tax on jobs’ which the previous administration initiated.”
The chancellor’s move on corporation tax was widely expected. The Conservatives had long argued Britain’s competitiveness was being damaged by a 28% rate.
In his first major speech as chancellor, Mr Osborne told the Confederation of British Industry he wanted Britain’s tax regimes to be among the most attractive for businesses in the G20.