Budget 2013 – How have businesses been affected?

Budget 2013 – How have businesses been affected?

On the 20^th March this year, Chancellor George Osborne revealed his Budget for 2013. There was a keen sense of intrigue prior to the Chancellor’s fourth speech, followed by plenty of scrutiny to see how the changes will impact our daily lives. In this article our independent correspondent, Ricky Derisz, takes a look at how certain changes will affect businesses.

There is no doubt that the 2013 Budget was aimed to give businesses a more positive outlook for the future. But did that turn out to be the case? I certainly feel this is reflected in the changes which have been made. For me, small businesses definitely benefit the most from this year’s Budget. The first significant announcement to help businesses is the cut in corporation tax. For those unfamiliar, corporation tax is essentially a tax on taxable profits for limited companies, clubs and societies. A recent news feature finger pointing at companies such as Starbucks, Amazon and Google, for not paying any corporation tax over the past two years brought this to the fore causing outrage to consumers.

So, Mr Osborne has announced that by April 2015, there will be a cut of 1% to corporation tax in the UK, which will bring the overall rate to 20%. It’s an admirable reduction, especially when you consider that barely a year ago the rate was at 24%. This would make tax rate in the UK one of the most generous in the Western world; becoming even lower than in Luxembourg which is considered a veritable “tax haven”. Furthermore, the USA charges 40%, whilst France and Germany charge 33% and 29% respectively. At an estimated cost of £750m to the Government, the intention is to hopefully encourage investment and spending from overseas. Suffice to say, the only way to decide if this is a truly good use of the taxpayers money is if this reduction stimulates the economy. It gives an incentive for businesses to invest, of course, but many businesses may see this as a good opportunity to simply save a bit of money and tighten their belts.

Another significant helping hand from the Government is in the form of changes to employee tax. In what Osborne describes as the “largest tax cut in the Budget”, businesses in the UK will now get up to £2,000 off their National Insurance Contributions. The Chancellor estimates that this may result in up to 450,000 businesses not paying any National Insurance at all. Without a doubt, this reduction not only offers big businesses the impetus to expand, but it also gives smaller businesses a bit of relief when deciding whether to employ new staff. However, such a cut doesn’t come cheap; in fact, it’s expected to cost the Government a cool £6 billion over the next five years. Let’s hope it works…

Whatever your opinion on the coalition, any small business owner would be hard pressed not to find something to admire in the Budget. The Government’s Business Bank, which will offer long term support for small businesses, is receiving an additional £1bn funding. The financial pressures of opening a new company can be crippling, so it is promising to see help from the Government. That is, of course, as long as the bank lends responsibly! It should start lending in 2013 and be fully operational by 2014 if things go to plan.

Furthermore, the Budget outlined plans to offer Growth Vouchers for small businesses. With £30 million funding over the next two years, these vouchers will offer a contribution to businesses seeking external business advice. For example, if an employer is seeking advice on taking out a business loan or whether to hire new staff, they may get additional help to make this more affordable. Again, this is useful way to support businesses, as long as the help isn’t just a token gesture. If the gulf between the cost of advice and the value of support is too big, the Growth Vouchers won’t be of much use to struggling businesses.

Start-up loans have been given £30 million funding as well, offering support for new business owners aged 18-30. The money is hoped to actively encourage entrepreneurs to take the leap and start a new business. Whilst it is good to see creative and often innovative minds being given support, the recent mistakes of reckless lending must not be overlooked. I’d like to view this as a purely positive action which will see the UK’s equivalent to Mark Zuckerberg, but my worry is lending money to young entrepreneurs could see them facing a failed business plan and big debts.

Finally, there are a few changes which will affect businesses and also individuals. The tax free earnings allowance of £10,000 is now coming in to effect from 2014, instead of 2015 as initially planned. This is a welcome announcement, although it would I doubt anyone would have complained if it had been introduced this year. Maybe I’m just being greedy. For those that like a tipple, the 1p reduction in beer duty will be worthy of raising a glass too. Before you get too excited though, wine and spirit drinkers aren’t being rewarded quite so well. You can now expect to pay an extra 10p on a bottle of wine, and an extra 53p a litre on spirits! Mine’s a pint, please…

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