Chancellor George Osborne unveiled his Budget yesterday, promising to reduce the deficit in public finances by £40bn over the next five years. Prime Minister David Cameron said the Budget was ‘tough’, but ‘entirely necessary and entirely unavoidable’.
Key points include an increase in VAT from 17.5 per cent to 20 per cent, a reduction in Corporation Tax from 28 per cent to 24 per cent over the next four years, and an increase in Capital Gains Tax from 18 per cent to 28 per cent for higher earners.
The Forum of Private Business said there were a number of positive measures which contributed to a ‘small business-friendly Budget overall’. The FPB welcomed measures to extend the Enterprise Finance Guarantee scheme, abolish backdated business rates and review all employment law.
Phil Orford, chief executive of the FPB, says, ‘I think many small business owners will be pleasantly surprised by today’s Budget. Not only did the Chancellor make all the right noises about supporting enterprise and smaller businesses, he backed it up with concrete, tangible policies.’
Orford adds, ‘Obviously the VAT rise will have an impact on many smaller businesses, either directly or indirectly. However, the money to pay off the deficit has to come from somewhere and I expect most FPB members would rather stomach a VAT increase than a rise in other taxes.
‘The 1 per cent reduction in small companies’ tax is obviously more than welcome – it’s something we and the SME community have long called for. It also represents a 2 per cent cut in real terms as the previous Government had planned to increase small companies’ tax by a further percentage point.’
However, accountant Kingston Smith said it looked like Labour’s intended increase from 12.8 per cent to 13.8 per cent for Employer’s National Insurance would remain in place. The coalition has introduced a new threshold for National Insurance payments, as well as a Regional Employer NIC Holiday for New Businesses.
A spokesman for Kingston Smith says, ‘The Government will face much criticism for dropping what appeared to be one of their major election promises to reverse Labour’s National Insurance increase, which they described as a “tax on jobs”. The two measures introduced, instead of scrapping the 1 per cent increase, go some way to addressing the cost of employing people in the UK, but are a much watered-down version of what was expected.’