Today was George Osborne’s Budget day, and one for SMEs to celebrate (at least a bit more than last year). He revealed that the first £2,000 of employer’s National Insurance each year is, well, no longer payable, and that corporation tax will be notched down a little again.
It’s a massive boon for the army of one-man-band firms out there, looking to take on their first employee but worried about the cost of doing so. It saves just under £200 per month on the cost of that first salary. If you already employ a bunch of people, you’ll still only save the nominal amount of £2,000, but 450,000 SMEs will pay no employer NI at all once the measures take effect.
For anyone whose business costs include fuel for vehicles, Osborne also announced that the fuel escalator (which applies duty at an increasing rate which exceeds inflation) will be scrapped altogether, meaning that firms will save in the coming years on fuel costs. Of course, it also means people can get to work more cheaply than otherwise.
The corporation tax cut, whilst not a massive cause for celebration with very small businesses, is significant. It will drop from 21% to 20% by next year, although it is only just due to reach the 21% mark this April from previous Budget policies. Interestingly this will give the UK the lowest corporation tax of any major economy – and even lower than Luxembourg’s 21%. He’s obviously hoping this will woo some more businesses into the UK.
But unfortunately, his cutting the UK’s growth forecast for 2013 to 0.6%, down from a previous estimate of 1.2%, stilted Osborne’s SMEs bonanza. The revelation drew loud cheers from MPs on the Labour benches, and in Miliband’s retorts speech he branded Osborne the ‘hashtag downgraded chancellor’ – which went on to trend worldwide on Twitter – and accused him of making ‘millions pay more so that millionaires can pay less’.
A rowdy House of Commons made it very difficult for Osborne to be heard at times, and at one point he even failed to begin speaking after a pause because he was choking on a mouthful of water from his glass. Cue derisive jeers and general parliamentary japery. For the other features of the budget, which include knocking a penny off the pint (of beer), and raising the threshold for income tax to £10,000, you can take a look at our super snazzy infographic.
In the mean time, the jury’s out on where this Budget will take us. With inflation and unemployment rising marginally this week, and growth forecasts falling again, the economy is crying out for SMEs to provide a rocket boost. Let’s hope that saved cash is spent on new recruits…