After the shenanigans of last Autumn with 4 chancellors in the matter of weeks and all the disruption and financial heartache that caused, tomorrow is an opportunity to start to put things right.
I’m not going to try and second guess what will be announced in the budget this week, it’s unlikely they are going to change the increase in Corporation Tax which comes into effect next month.
Any other changes are likely to be either short-term thinking with a General Election on the horizon next year or something that might come into effect in future years.
But the corporation tax increase is a really tough one to take, especially for smaller businesses.
For years the rate reduced by 1% a year to its current rate of 19% but from April 1st it goes up to 25% (26.5% for businesses with profits between £50k & £250k).
The millions of people who already run limited companies will just have to take this increase on the chin.
They will actually be paying 39% extra corporation tax on profits over £50,000 which is scandalous!
Where the Government is being short-sighted (as well as letting bigger businesses off the hook) is that it now makes it less attractive to start a small business in the UK.
This in turn means that people are less likely to innovate and keep the country a competitive place to do business.
Alternatively, sole traders will think they may as well ‘stay small’ not only below the VAT threshold, but why should they look to expand, employ people, and become limited when they will pay more tax on the profits?
Small Business Start-Ups
It wasn’t long ago that there was an extra perk to running a limited company by the way of tax-free dividends, again encouraging growth and the ability to employ people but this has stopped now too.
It is short-sighted and shows the Chancellor’s lack of understanding of how small businesses work.
Many of our clients will keep pushing on and try to improve and grow their businesses – as will I – but I think the uptake of new firms will drop (other than those who must due to redundancy).
In my view, we’ll have problems of living in a country that doesn’t encourage the growth of small businesses and the innovation that is driven by entrepreneurs wanting to grow a business, secure their future and employ more people.
Ultimately people need to focus on what they keep after tax rather than the tax they pay.
However, with the right planning and support there’s no reason why this shouldn’t continually improve but my personal view is that the Chancellor and his advisors are not progressing things in the right direction.
Conclusively, we have to deal with whatever tax regime we work under, it will not make or break your business, as long as you have your operations, sales and marketing and financial support (from your accountant) sorted then you’ll be fine.
In full-filling our mission, we’ll get to know you and your business and what it is that is important to you. We like to build a close and honest relationship with our clients in which we can inspire, challenge and support you to achieve your goals. We provide the best advice and friendly environment for you to discuss and consider your options.