The Queen’s Speech in May put business towards the top of the government’s agenda, but how does Chancellor George Osborne’s first Budget in the new majority Conservative government match up with the proposed legislation?
Tax was a large theme within this Budget: the personal tax allowance, at which people start paying tax, is set to rise to £11,000 next year, whilst corporation tax is going to fall from 20% to 19% in 2017 and 18% in 2020.
According to the Chancellor, the smaller rates of corporation tax will help businesses grow and invest with confidence, with benefits for over a million companies.
The government will also be clamping down on tax avoidance and tax evasion and is increasing HMRC’s Budget by £750m, with the hopes that the clampdown will raise £7.2bn.
Permanent non-dom status will be abolished and from April 2017, anyone who has lived in the UK for 15 of the past 20 years will pay the same level of tax as other UK citizens.
Dividend tax credit is to be replaced with a new tax-free allowance of £5000 on dividend income and rates of dividend tax will be set at 7.5%, 32.5% and 38.1%.
Meanwhile, National Insurance employment allowance for small firms is to be increased by 50% to £3000 from 2016. This measure is intended to help businesses with additional wage costs and Osborne claims that this increase in employment allowance will be businesses are able to employ four workers full-time on the new National Living Wage with paying any National Insurance contributions.
The introduction of the National Living Wage is one of the biggest announcements made during the Budget which will affect all employers across the UK. Next April, employers will be obliged to pay those 25 and over a minimum of £7.20 an hour and this rate will rise to £9 per hour by 2020. This is compulsory and replaces the minimum wage which is now £6.50. Another of the biggest announcements which will affect businesses across the UK are the proposed changes to Sunday trading laws. A consultation is being held to decide whether local powers such as Elected Mayors and local councils should be given the power to amend local laws and allow businesses to trade for longer on a Sunday.Currently smaller shops are allowed to open all day on a Sunday but those over 280 sq m (3000 sq ft) are only allowed to open for six hours. Should such laws be relaxed, there is the potential to boost economic activity, but others worry about the impact this will have on small businesses.
On the state of the economy, Osborne revealed that the economy grew by 3% in 2014 but the growth forecast has been downgraded to 2.4% in 2015, 0.1% lower than predicted in March.
However, the Chancellor has predicted one million extra jobs will be created by 2020.
Chancellor George Osborne has said: “This will be a Budget for working people. A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.”
In summary, a large number of measures introduced in this Budget will have significant impact on UK businesses. For additional services beyond simply forming your company, make sure to visit http://www.ukplc.com.
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