Summer Budget 2015
Entrepreneurs and their businesses
The first Conservative Government Budget for almost twenty years was eagerly awaited by entrepreneurs. As the Chancellor rose to his feet, there was an expectation that the Conservative Government would support the engine room of the British economy – the small and medium sized business – with policies which would continue to support innovation, growth, lower taxes and lessen red tape.
For the entrepreneur
Many entrepreneurs will be pleased that no further measures relating to entrepreneur’s relief were announced (the relief enables entrepreneurs who qualify for the relief to sell shares in their business and pay 10% capital gains tax on the gain up to a lifetime allowance). However, there will have been some disappointment that this has not been extended further.
Equally many entrepreneurs and family-owned businesses may be adversely impacted by the increase in dividend tax rates for basic, higher and additional rate tax payers to 7.5%, 32.5% and 38.1%, where they extract profits from their business by way of dividends. This is subject to a new £5,000 dividend allowance which would enable entrepreneurs to receive this amount without a further tax charge.
Entrepreneurs will generally be pleased with the certainty that the Government has provided and is seeking to provide for their businesses for the next five years, but may hope for more incentives from a personal perspective in future Budgets.
For their businesses
There was the headline-grabbing good news measure of a further reduction in corporation tax from the current 20% down to 19% in 2017 and 18% in 2020. The Chancellor also announced that from 1 January 2016 he will set the amount businesses can invest in capital assets and take a full deduction against their profits to £200,000 indefinitely. This means SMEs can keep more of their profits to be ploughed back into the business, used for expansion and investment, or taking on new employees.
The Government also announced it would increase the national insurance contributions Employment Allowance from £2,000 to £3,000, which is an immediate saving for businesses from April 2016. This will be helpful for very early stage businesses and those with few employees.
All of these measures help entrepreneurial businesses hold onto more of their money and invest in growing the business. It is also positive news that the Government have proposed publishing a business tax roadmap by April 2016 which will set out the policies for the next five years.
However, there may be an increase in costs following the announcement that a new National Living Wage will be introduced.