[caption id="attachment_4412" align="alignright" width="296"] Chancellor George Osborne (hm-treasury.gov.uk)[/caption]
Guest post by Snapdragon Consulting:
George Osborne became the first Chancellor since Ken Clarke in 1996 to deliver a majority Conservative government budget to the House of Commons.
The global economic outlook in 1996 was much more benign than it is now, as Greece looks likely to leave the Eurozone and the Chinese stock market continues in free fall.
Having already committed to delivering £12bn of welfare cuts, a budget surplus by the end of the Parliament and no rises in income tax, VAT and National Insurance Contributions, the Chancellor, on paper, did not have a lot of room to manoeuvre. One might have expected a dull Budget, but that was certainly not the case. The policy wonks among us will have plenty to sink their teeth into.
For business owners and individuals with investment portfolios, the Chancellor has reformed the way in which dividends are taxed.
A £5,000 dividend tax free allowance will replace the dividend tax credit, and new tax rates of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers will be introduced. For those with small investment portfolios, this news will be welcome.
It was something of a surprise to see the Chancellor announce a Corporation Tax cut to 19% by 2017, and to 18% by 2020, which will result in the UK having the most competitive corporate tax regime in the G20.
The cut in Corporation Tax and the introduction of a National Living Wage of £9 p/h by 2020 for those over 25 were the two flagship policies kept quiet by the Chancellor, designed to lead the news bulletins, and both will have an impact on SMEs.
The Employment Allowance was increased by 50% to £3,000 along with the introduction of a permanent Annual Investment Allowance, set at a rate of £200,000, which will be welcomed by SMEs looking to invest in the coming months and years.
The prospect of including peer-to-peer loans within a so-called Innovative Finance ISA to be in operation from April 2016, will be welcome as well.
So for business there is much to digest as tax and regulatory changes bed in. Questions around business taxation still remain unresolved. Business Rates reform remains under consultation, and much needed reform to Empty Property Rates has not been delivered.
As the British economy charts a course through choppy global waters, we will wait and see whether the measures taken in this Budget are sufficient to encourage productivity and the necessary investment in the UK’s SMEs to keep the economy growing.