How the Summer Budget changed the landscape for SMEs
Those who listened to the Summer Budget on 8th July for news affecting small businesses will no doubt have been glad to see corporation tax slashed and the employment allowance increased, but an article recently published by KPMG asked, did the Summer Budget go far enough in announcing measures to help small businesses grow? In the lead up to the announcement, Bivek Sharma, Head of Small Business Accounting at KPMG, called for moves to simplify the business taxing system and help small business access cash, funding and investment. Whereas the lowering of corporation tax to 19% in 2017 and 18% in 2020 will have some impact, for the majority of UK startups and small businesses, which generate only a marginal profit, the impact is, unfortunately, likely to be minimal.
While the reduction in corporation tax may not be felt so keenly by startups and small businesses, the change to National Insurance Employment Allowance surely will. A 50% increase from £2,000 to £3,000 will see businesses reduce their wage bill and although the new Living Wage of £7.20 is also likely to cause some financial disruption, National Insurance Contribution measures assist in helping them to offset increased wage bills.
Similarly, the Annual Investment Allowance, which allows SMEs to make tax-deductible investments in equipment, plant and machinery, has been set at £200,000 – a welcome move when many businesses were sure the announcement would see the allowance cut to £25,000. This new, long-term rate should see businesses able to boost productivity in their respective sectors, feeding the UK economy.
However, it wasn’t all good news. Speaking on the changes the Chancellor announced to dividend tax, Bivek Sharma commented that whilst the UK’s army of SMEs were certainly a feature in the Chancellor’s proposed plans, many small business owners could find themselves hit hard by the changes to the dividend tax credit regime. Tweaking dividend tax means that some business owners may end up paying less, but those who pay themselves the top rate will find this comes as an issue involving a big adjustment in a very complex area.
In the closing comment in the KPMG article, the Summer Budget revealed some plans set to aid small business growth, but for others looking for measures to help them access the fundamental tools for startup success; there’s still a way to go.
Sources: www.kpmgenterprise.co.uk (Article: 2015/07/09)