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21 March 2013

A business guide to the 2013 budget

The general consent from this year’s budget is that small and expanding businesses are likely to be the biggest beneficiaries. National Insurance exemptions, fuel duty and plans to bring corporation tax down to 20% have all been welcomed by the business community, as chancellor George Osborne looks to reward the ‘doers’ of the economy.

The general consent from this year’s budget is that small and expanding businesses are likely to be the biggest beneficiaries. National Insurance exemptions, fuel duty and plans to bring corporation tax down to 20% have all been welcomed by the business community, as chancellor George Osborne looks to reward the ‘doers’ of the economy.

Previous forecasts

Recent projections over economic performance in Britain has led to Mr Osborne being labelled as the ‘downgraded chancellor’. Initial forecasts from the coalition were that:

  • inflation would be back at 2% by now
  • the economy would be growing at 2.9%
  • workers would be rewarded with 5% wage increases.

Needless to say, these projections have not transpired into reality, and the economic outlook announced yesterday (March 20th) looked far bleaker.

The UK is expected to avoid a triple dip recession, albeit it narrowly with 0.1% growth in the first quarter. Sluggish growth is expected to remain throughout the year staying under 1% before improving slightly over the next two years, hence the country’s recent downgrade from Moody’s, and inflation figures show increases from 2.7% to 2.8 % after four stable months, which suggests price rises are still not under control.

What is the chancellor going to do?

From the look of the 2013 budget and the political rhetoric that accompanied it, Mr Osborne is seeking to put the impetus back on business as the driver of growth. Optimism is already up in the private sector and job creation is moving at an encouraging rate despite the economic backdrop, which suggests businesses are ready to take the lead in driving the economic recovery.

Mr Osborne’s role, therefore, is to enable such a drive to take place. This means reducing red tape and easing taxation, especially at an early stage when growth is fragile.

National insurance contribution changes

Up to 450,000 small businesses will no longer pay national insurance contributions from next year in what the chancellor described as “the largest tax cut in the budget”. What’s more, he outlined plans to cut corporation tax to 20%, which will come into effect from April 2015.

Welsh Policy Unit chairwoman for the Federation of Small Businesses, Janet Jones, said: “We have advocated an extension to the current NICs holiday scheme for some time. We are pleased that the chancellor has gone further and has completely taken out some employers from paying National Insurance at all.

“This will help businesses that are wary of the cost of employment to take on staff and help those that do currently employ, to free up funds to expand their business.”

Mr Osborne reiterated her sentiments, saying: “For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax.”

Every little counts

Other developments of note for small businesses include scrapping the fuel duty rise earmarked for September. This is good news for businesses that rely on the motorway as a means of doing business, with the 3p rise in fuel duty permanently offset by the chancellor, rather than just postponed. Considering 85% of businesses rely on a vehicle for work, this is welcome news.

The finance bill 2014 will introduce legislation to increase the small loans exemption limit from £5,000 to £10,000 which will allow employers to provide beneficial loans to their employees for things such as rail season tickets. New rights-for-shares arrangements will also help employers by allowing the first £2,000 of shares received by employees to be tax free.

Finally, For those who enjoy a Friday night pint after work, you will be pleased to hear the general duty on beer will be cut by 2% from March 25th.

D2 Interactive