When my last piece came out, we were just about to head into the Budget announcement. We’ve now had plenty of time to digest it in detail. It’s probably fair to say that the Chancellor has come in for some criticism from a number of parties since the announcement, even from his own side of the House, and has faced considerable resistance. But from the perspective of business and business owners, it was a Budget to be welcomed that has listened to our needs and concerns.
At Peninsula, we advise more than 30,000 companies, many of which are small businesses. As trusted adviser, we hear a lot of their worries and concerns. The Chancellor has long said he’s the champion of small businesses and of the culture of entrepreneurship so valued in our country. In this Budget, many of those calls to action were heeded and represented and that is something to be welcomed.
The headlines, in general, make for good reading for business. Supporting small businesses was one of the first issues that the Chancellor raised within the 2016 Budget speech and he followed through with some real promises to support that pledge.
Firstly, he announced a further reduction in corporation tax to 17% by 2020 which will make us the country with the lowest rate of corporation tax in the G20. This can only serve to increase the UK’s competitiveness and attractiveness as a place to do business, open a business and grow a business.
Secondly, the changes to the business rate threshold set to be implemented in April 2017 will be a further boost for many of our clients. 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% relief is available if you’re a business that occupies a property (e.g. a 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. This means that 600,000 businesses will pay no rates.
Business rates have long been a major bugbear for small businesses and the reforms to rates – the biggest single tax cut in the Budget – will inevitably have a positive effect on small business. Many will see a significant reduction in their business rates, or even see them abolished altogether.
Thirdly, the reductions in capital gains tax should ensure investment in new business continues to be an attractive proposition. From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%, except in relation to residential property sales and carried interest (the latter is something which only really affects private equity firms).
The Government wants to create a strong culture of enterprise and investment and is hoping that by cutting the rates of CGT for most assets, companies will find it easier to access the capital they need to expand and to create jobs. By excluding residential property, they are trying to incentivise individuals to invest in companies over property and let’s hope that is proven to be the right strategy.
The economic backdrop is precarious at the moment for many reasons, be they global or domestic. The Chancellor outlined this in no uncertain terms. This was echoed by the CBI’s Director General, Carolyn Fairbairn. Despite her warnings on the economy, reflecting the Chancellor’s concerns, she nonetheless welcomed, “a stable Budget for business facing stormy waters.” She was right. This was a Budget for business and one to support growth, investment and enterprise.