Member Article

2016 Budget: A budget for small business owners

‘A pleasant surprise’ is how Mitchells Chartered Accountants and Business Advisers greeted George Osborne’s 2016 Budget, hailing it ‘a budget for small business owners’.

The overall feeling from Chesterfield-based Mitchells is one of positivity, with the Chancellor’s announcements on stamp duty, business rates, Corporation Tax and Capital Gains Tax, Class 2 National Insurance Contributions (NICs) and the new Investors Relief, all considered as good news for small business.

Partner Andrew McDaid said: “All of the positive news announced in this budget should be looked at in the context of previous budget announcements which are going to hit the profits of SMEs, such as the introduction of the Living Wage, and Auto Enrolment. SME owners are also going to be hit hard from 6 April 2016 by the changes to how dividend income will be taxed on the many who remunerate themselves via dividends.”

The good news was tempered however by the Chancellor’s revising downwards of growth forecasts for the next five years as well as the clampdown on individuals working through their own company in the public sector. However, Budget 2016 highlights for the team at Mitchells included:

Corporation Tax rate to be cut to 17% in 2020 UK Corporation Tax is already the lowest in the G20. The latest announcement reducing it from 20% to 17% in 2020 will benefit more than one million businesses.

Partner Tim Leeman welcomed this move and believes it will stimulate small business growth. He said: “The reduction in Corporation Tax will only serve to encourage businesses to invest as less tax means more cash remaining to spend on things like equipment and training.”

New stamp duty rates for commercial property from 17 March 2016 Andrew McDaid welcomed the new stamp duty rates and business rates for commercial property which take immediate effect. He said: “Overnight businesses will save thousands on Stamp Duty on freehold commercial property transactions following the introduction of a stamp duty threshold.”

From 17 March stamp duty is only applicable on the proportion of the transaction value over £150,000. Andrew commented. “What a difference a day makes. As an example, if you bought a property worth £270,000 the day of or before the Budget announcement you would pay more than £8,000 in stamp duty but now you will pay just £3,000.”

Cutting business rates for more rate payers Andrew said: “For business property owners and tenants there is more good news to follow next year because from April 2017, small business rate relief will be permanently available removing rates costs entirely for around 600,000 small businesses and lowering rates for a further 250,000 SMEs, which is great news for Chesterfield’s largely SME economy.”

From April 2017 there will be 100% business rates relief for businesses that own properties with a rateable value of up to £12,000 – a 50% increase from the current threshold. There will also be tapered relief on properties worth up to £15,000.

Capital Gains Tax rates will be cut from 6 April 2016 From April 2016 the higher rate of Capital Gains will be cut from 28% to 20% and the basic rate from 18% to 10%. Another immediate win for businesses which was welcomed by Mitchells but described as ‘a surprise move.’

Andrew McDaid said: “A further benefit includes the fact that all taxpayers will only pay 10 per cent on the sale of shares in unlisted trading companies held for a minimum of three years. Perhaps this was done to encourage potential investors away from buy to let properties, following the previous announcements which will significantly impact private landlords.”

Richard Trueman, managing partner, warned that that the changes to Capital Gains Tax wasn’t all good news, particularly for buy to let investors. He said: “There will be an 8% surcharge for sales of residential property which effectively negates the benefits for property investors and landlords.”

Entrepreneurs’ tax relief will be extended to long term investors in unlisted companies Another immediate win for businesses. Under the new rules, entrepreneurs will be able to access a 10% rate of capital gains tax on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016. These will be subject to a separate lifetime limit of £10 million of gains.

The government will also allow entrepreneur’s relief to be claimed on the disposal of privately held-business assets to a family member, and will allow more relief in joint ventures and partnerships where the existing 5% minimum holding conditions are not satisfied.

Tim Leeman said: “I am particularly pleased that Entrepreneurs Relief has not been messed with as this is an important incentive to anyone seeking to commence, develop and ultimately dispose of a company. The extension of Entrepreneurs’ Tax relief to long term investors in unlisted companies will improve investment in entrepreneurial start-up companies and will stimulate economic growth.”

Class 2 National Insurance Contributions (NICs) for self-employed people will be scrapped from April 2016 The government announced its intention to reform self-employed National Insurance contributions (NICs) in the March 2015 and July 2015 Budgets. From April 2018, Class 2 NICs will be abolished. This represents an annual tax cut for 3.4 million self-employed people of £134 on average as well as ending an outdated and complex feature of the NICs system.

Richard added: “As with all Budgets, there are winners and losers. If you’re unsure which camp you and your business falls into, then speak to our expert team of tax advisers who can help you make sure you are not missing out on any reliefs or allowances or, more importantly, ignoring any new tax legislation.”

To find our more how Mitchells Chartered Accountants and Business Advisers can help your business prosper in today’s economy, contact 01246 274121 or visit www.mitchellsaccountants.co.uk.

This was posted in Bdaily's Members' News section by Ben Leach .