What Budget 2013 means for Independent Business

George Osbourne’s latest budget was released yesterday and was full of swings and roundabouts, but what does it means for the business owner?

There are many positive moves for business, although it is set in the context of further downgrades in economic outlook; an indication that the tough time aren’t quite over yet. Some key impacts for business will be:

National Insurance Contributions Exemptions – This is a great initiative and can save employers up to £2,000 a year from April 2014. Combined with the earlier than anticipated rise in personal allowance to £10,000 also from 2014 this helps keep employment affordable for small businesses.

Fuel Duty Freezes – For businesses with significant transportation costs this will be a relief, as there are no planned increases in fuel duty. Additionally the tax breaks for Shale Gas Companies further indicate the Governments desire to keep energy affordable.

Tax Fee Employer loans – Previously up to £5,000 could be provided as an interest free loan by an employer tax free, this has been increased to £10,000 from April 2014. For the small business owner this provides a bit more flexibility as to the timing of dividend declarations and a possible tax reduction if these had previously been interest bearing or taxed as a benefit.

Main Rate of Corporation Tax – The main rate of Corporation tax will be reduced to 20% earlier than previously announced, by 2015; it will be 21% from 2014. Many businesses will be uneffected as they already pay at the small companies rate of 20% but the harmonisation of the rates may have some other impacts. Large companies currently pay their Corporation Tax quarterly whereas small businesses pay it 9 months in arrears, it is possible that there may also be moves to harmonise the payment systems also, although no announcements have been made regarding this.

What action should you take?

As many of the impacts don’t come in until April 2014, there should be no requirements to adjust your business budgets for this year; however, you should start thinking now about the impact on next year’s budget. If your business pays tax at the 20% rate it previously it had an advantage over it’s bigger competitors, that is now being removed and that could result in margin squeeze. Also with an election on the horizon just 2 years away and the economy still in bad shape, it is likely that the initiatives announced such as the NI exemption will be very temporary in nature. Therefore we would encourage businesses to think carefully before taking on extra staff and have a stress tested budget of their own, along with a plan going out 3-5 years, to ensure the plan is resilient enough to handle further margin reductions or downturns in demand. If you would like help in doing this then please contact us and we will be pleased to discuss your requirements with you. Then, once your plan is in place (but not before Sunday), go down the pub for a beer, as from then it will be cheaper. Cheers!

Full detail of the budget can be found at: BBC Coverage