subject: Emergency Budget 2010 – What it means for the Small Business [print this page] Emergency Budget 2010 What it means for the Small Business
The Chancellor George Osborne's Emergency Budget was a mixed bag for small businesses with varying ramifications. How will the key announcements affect your business?
Corporation and Small Companies Tax Rate Cut
It is estimated that over 850,000 small businesses will benefit from the small companies tax rate cut which will be lowered to 20% from April 2011 onwards. Corporation tax will be reduced to 24% over the next four years. This news has been welcomed by many business leaders, and the idea is this will spur on private sector growth and make the taxes businesses pay the lowest out of the whole of the G20, making the country more business friendly to outside investors.
National Insurance Tax breaks for start-ups
The one-year tax break for the first 10 employees hired for businesses outside London, the southeast and eastern England will provide savings up to a maximum of 5,000 per employee: excellent news for start-ups. However, the tax break is not available for those businesses already in existence or those outside the areas mentioned: something that could well attract criticism.
VAT to be raised to 20%
This rise is expected to hit small businesses hard. John Walker, National Chairman of the Federation of Small Businesses, sent a warning after the announcement saying: "The increase in VAT to 20% will hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost." Consumers may decide to put off spending once the rise kicks in after January 2011, potentially causing a drop off in trade and many businesses that are currently loitering on the edge could be pushed over with this rise.
Key Advice Understand the Consequences
It is important to keep an eye on these developments and seek advice on how the VAT rise and the all the other measures could affect your business. Seek advice is the message, if anything is not 100% clear.
