Britain’s small businesses gave a general ‘thumbs up’ after today’s Budget. The key announcements affecting businesses relate to the extension of the small business rate relief and a reduction in the main rate of corporation tax.
Business rates is a type of tax that is calculated according to the rental value of the property that a business uses. With many businesses now based on the internet, critics have queried why a company should be taxed based on the physical space it uses.
There has been criticism of the existing structure of business rates for some time, with many arguing that it is outdated and should be abolished for smaller businesses altogether.
The Chancellor, George Osborne, today announced reforms to more than double the threshold for small business rate relief from £6,000 to £15,000. These changes will take effect from April 2017. According to Mr Osborne, these reforms will mean 600,000 small businesses pay no rates at all and 250,000 will have their rates cut.
The Chancellor also announced that future business rates increases will be based on the Consumer Price Index rather than the Retail Price Index, leading to more accurate business rates bills for retailers.
Mr Osborne announced that the main rate of corporation tax will be reduced to 17% by 2020. The rate at the start of the parliament in May 2015 was 20%.
Capital Gains Tax
From April 2016, capital gains tax to be cut from 28% to 20% for higher rate taxpayers, and from 18% to 10% for basic rate taxpayers.
There will be a general feeling of optimism and satisfaction from SMEs following today’s Budget announcements. The increased threshold for small business rate relief will be particularly satisfying given the calls for change over the past few years.