Chancellor George Osborne promised a ‘strong enterprise led recovery’ in his emergency Budget on June 22 and received a generally warm reception from the business community. A VAT rise from 17 ½ to 20% won’t be great news for consumer facing businesses, but the cut backs in public services should increase the need for flexible workers in the sector due to an inevitable reduction in fixed-term staff.
The small business community has been generally left unscathed by swingeing cuts, but a commitment to review pension policies could result in reduced tax-free contribution allowances and higher tax bills for contractors.
A few more key points:
– Small companies rate of tax is being reduced from 21% to 20% from April 2011.
– Entrepreneurs relief has increased to £5 million from £2 million in the April Budget and the 10% level of Capital Gains Tax still appears to be applicable to this level.
– Basic rate tax payers (including many contractors who pay a nominal salary and dividends up to the higher earnings limit) may benefit from the increase to the personal allowance from £6475 to £7475, saving £200 per annum in income tax at source.
Following on from the Budget, the coalition government once again promised a swift review IR35 and offer more details regarding the proposed Office of Tax Simplification.
For the best, most in-depth analysis of the Budget check out the brilliant free guide we’ve produced in association with financial planners Wealth Matters.