Last week, George Osborne arose in the Commons to deliver his fourth budget, designed to build an ‘aspiration nation’ and help those ‘who want to get on’. As such, this year’s budget carried some good news for Britain’s self-employed, Osborne appearing eager to ease some of the strains facing UK SMEs.
Sifting through the political posturing and the mass of media coverage then, what exactly did the 2013 budget entail for the UK’s freelancers, contractors and small businesses? Well, below is a brief overview…
A new Employment Allowance
Amongst Osborne’s proposals came the promise of a new employment allowance, which is good news for smaller businesses employing staff.
Operating from April 2014, this change in legislation means that SMEs will avoid paying the first £2,000 in employer national insurance contributions. Essentially then, any business taking on an employee on up to £22K, won’t need to pay anything in employment tax.
In turn this should help small businesses keen to hire their first employee, or expand their workforce. According to the treasury’s sums, any business with 10 members of staff or fewer will see their employer NICs bill cut by £805. A significant saving.
A rise in Personal allowance
2013’s budget included a proposal to raise the Personal Allowance – the amount of cash a UK employee can earn before paying income tax – to £10,000.
This additional rise marks an increase from £9,440, that rate coming into effect this month. Essentially, it’ll allow low and mid-tier earners to take home a little more of their pay.
The (eventual) introduction of a new business bank
This was actually announced in autumn of last year and it appeared to have disappeared into the ether. However the budget illustrated that there’s been a significant amount of work going on behind the scenes, Vince Cable keen to get the bank set up and lending.
Its aim is to provide a comprehensive package of financial support by bringing together all the different schemes out there, with £300m of investment set to be committed by the end of the current financial year.
According to Cable the Business Bank will ‘bring together £1bn of new Government capital and £2.9bn of existing capital’ which will ‘work alongside private sector contributions with the potential to be enhanced by guarantees’.
If it lives up to its billing, then the Business Bank could prove amongst the biggest announcements in 2013’s budget. Hopefully it’ll offer the alternative to the banks that’s so needed.
The introduction of Growth Vouchers
At time of writing the details are a little sketchy on this, but according to the budget document…
‘To provide further support for SMEs, the Government will provide £30 million for a Growth Vouchers programme in England. This programme will test a variety of innovative approaches to helping SMEs overcome barriers to achieving growth, such as limited use of external advice. It will target a number of speciﬁc areas of advice such as making a successful loan application to a bank or taking on an employee.’
An increase in the company loans threshold
The government currently allows companies to loan their staff money for things like Train season tickets. At the present time these loans are exempt from tax up to £5,000 and the budget aims to increase this amount to £10,000 as part of the Finance Bill 2014.
Depending on whether you’re a freelancer, contractor or a micro business with employees, this might have differing implications, so bear it in mind and if you’ve an accountant, have a chat with them.
If you’re looking to switch back to a sole trader model from a limited company, then there’s some good news in that for five years from April 2013 you’ll be able to do so without paying Corporation Tax, should certain items be given to shareholders. According to a passage in the budget document…
‘The relief will allow a company to transfer goodwill and an interest in land to its shareholders so that no corporation tax charge arises on the company on the transfer. At the present time ‘the relief will be available to businesses with total qualifying assets not exceeding £100,000’
An increase in the VAT Registration Threshold
More good news comes in the shape of an increase in the VAT Registration threshold, within the document you’ll read that ‘From 1 April 2013 the VAT registration threshold will be increased from £77,000 to £79,000 and the deregistration threshold from £75,000 to £77,000.’
The speeding up of card payments
Lastly, the Government has ‘secured a commitment’ from the payment card industry to ‘reduce the time it takes for credit and debit card payments to reach SMEs’ bank accounts by up to three days’. So hopefully that might ease up some of your cash flow woes!
That’s about the biggest news we found working our way through the budget document, if you want to take a look for yourself, you can get your hands on a PDF here. Be warned, it’s not the most exciting reading though!