Yesterday’s Budget announcement was being touted well in advance as one of the defining such announcements of our time. Gone are the days when the doors to the Treasury would lock for weeks before the announcement, the press left completely in the dark about the contents of the annual Budget Red Book. Instead, today portions of the announcement are leaked weeks in advance. It is perhaps a measure of the importance of the 2009 Budget, therefore, that it still contained a number of significant surprises.
There is a general recognition that SMEs will be amongst the key drivers of the eventual economic recovery. As such, there was hope that this would be a Budget not just for jobs, but also for small business.
Many commentators have been disappointed; the Federation for Small Businesses (FSB) said yesterday that Alistair Darling has “largely ignored the small businesses that are at the heart of job creation and economic recovery.”
However, while the announcement may not have brought all of the respite for which some were hoping, it contained a raft of new information that will likely to impact in some way on you and your business.
For many, the most important part of yesterday’s Budget was an extension of the help offered to loss-making businesses. The Chancellor announced that, until November 2010, companies currently making a loss will be able to reclaim tax paid on income from the previous three years.
Tax relief is not just extended to loss-making businesses, though. The Capital Allowance rate has also been doubled to 40 per cent for firms spending more than £50,000 on allowable items. Capital Allowances mean that you can deduct from your taxable income a percentage of the costs you incur through certain purchases.
New help for jobs
A significant portion of the Budget announcement focused on new financial help aimed at getting young people into jobs and work experience. As the FSB points out, “Small firms are the economy’s job creators,” and SMEs can therefore expect to benefit from some of this new help.
£250m will be made available to offer people work experience placements in ‘growth industries’. Although the specifics of this plan are as yet unclear, it would seem likely that some of this cash will be made available to businesses, with a similar arrangement to the currently expanding apprenticeship scheme.
Aside from this, all under-25s who have been out of work for a year will be offered training or a placement. As a result, many small businesses may benefit from an influx of interns - hugely beneficial during a time in which many are making redundancies.
If, like many small business owners, you rely on a vehicle to help you do your job, you will no doubt be disappointed by the Chancellor’s announcement that fuel duty will rise by 2 pence in the pound. The unpredictability of oil prices, exacerbated by a potential return to OPEC militancy, threatens to increase the cost of petrol even further, and your own budgets may need to be redrawn as a result.
Alcohol and tobacco have also risen by 2 pence in the pound, with the increases coming into force at 6pm and midnight last night respectively.
The other notable tax rise is the surprise new 50 per cent top rate. If you are one of the 300,000 people in the country (according to estimates given during a Treasury briefing this afternoon) earning more than £150,000, you can expect to see your tax bill rise from April 2010. Furthermore, if you are one of the 600,000 people earning £100,000 or more, your pension tax relief will be cut from April 2011.
Finally, if you work in the motoring trade you may have been heartened by last week’s leaks about the car scrapping scheme. Under these plans owners of cars more than ten years old will receive a £2,000 incentive to trade in and buy a new model. The intention is to encourage a shift towards newer, greener models, while kick-starting the flailing motor retail sector.
However, the small print of the Budget Red Book states that, while the government will foot half of the £2,000 bill, the car industry will be expected to pick up the remaining £1,000.
It will take some time for the businesses and the economy at large to see the true impact of yesterday’s Budget, particularly as many of the tax rises and other plans do not take effect for almost a year. Regardless, however, you may wish to think about talking to your accountant, who will be able to advise on the specific implications for you and your business.