Osborne Reveals 2016 Budget

As everyone anticipates the glory of the British spring to burst forth, we in the meantime await news from George Osborne's next budget – the third since his party claimed election victory last summer.

It doesn't feel like 4 months since his Autumn Statement, which brought pretty good news for British SMEs; Osborne announced the extension of the Funding for Lending Scheme and rate relief, and announced a £12 billion Local Growth Fund.

Also, with the EU referendum looming, it's expected the spring budget may be less dramatic with a potential Brexit on the horizon. With more cuts on their way, could small employers be hit with changes to employer pension contributions, on top of the introduction of the National Living Wage and uncertainty about the November-announced levy for apprenticeships?

Here's the round-up of budget news affecting SMEs

Economic overview

• Debt target as not been hit, and growth predictions have decreased, due to issues including turbulent markets, slower growth in emerging economies like China and weak growth in developed countries.
• The UK economy is expected to grow quicker than any other advanced economy in the world.
• A surplus of £10 billion - previously expected to be £23 billion - is expected in 2019/20.
• Lower growth figures: 2015 2.2%, 2016 2%, 2017 2.2%, 2018 2.1%, 2019 2.1%, 2020 2.1%.
• Government aims to save a further £3.5 billion by 2019/20.
• Debt is expected to fall to 82.6% this year.
• OBR commented: Brexit could cause disruption in business and consumer activities.

Employment

• Unemployment has again fallen - lowest number of people claiming out of work since 1974. Rates are falling fastest in the North East.
• Businesses have generated 150,000 new jobs - more than expected.
• 1 million more jobs are expected to be created during the current parliament.
• To raise £12 billion over this parliament, including cracking down on the royalty payments that firms use to shift money to tax havens.

Small business

• Loop holes in corporation tax to be closed, including a stop to royalty payments used by companies moving money off shore.
• Corporation tax will be reduced to 17% by 2020.
• Osborne is developing a "low tax regime" that'll level the playing field that's been "tilted against small business".
• Business rates for small business are being cut: Rate relief for businesses to go up from £6,000 to £15,000 – from April next year more than 6000,000 SMEs will not pay business rates.
• Abolishing of tax on carbon reduction commitment but increasing climate change levy in 2019.
• From Thursday 17 March commercial stamp duty is to be reformed to support smaller retailers: 0% up to £150,000.
• "Micro-entrepreneurs" get a "tax break for the digital age" with two new £1,000 allowances for people making an income through the sharing economy like Airbnb and e-commerce businesses. Tax will no longer need to be declared or paid for under the new threshold.
• Also, there'll be a clamp-down on overseas sellers storing and selling stock in the UK customers, but paying no VAT.
• From April 2016, there'll be reductions in capital gains tax: headline rate of 28% will go down to 20%. Basic rate is going from 18% to 10%.
• Supplementary tax on producers of oil and gas will be chopped by half to 10%.
• Fuel duty is frozen - good news for businesses relying on transport / delivery.

Infrastructure

• HS3 between Manchester and Leeds, the 4-lane M62 and other northern infrastructure projects are given green light to support the Northern Powerhouse.

Salary

• Class 2 NI to be scrapped from 2018, saving over £130 for each self-employed person.
• Personal tax allowance will rise to £11,500 in April 2017. Higher tax bracket will increase to £45,000.

Devolution

• An East of England combined authority to be part of the "devolution revolution", and receive a £1 billion injection.

Jeremy Corbyn responded to the budget statement – his points included:

• 80% of public cuts have impacted women - the Chancellor has failed to deliver on fairness and gender equality.
• The manufacturing sector is smaller than it was 8 years ago, and the construction industry is stagnating.
• Thousands of skilled jobs have been lost in the steel industry due to government inaction.
• Science spending is down £2 billion compared to 2010.
• The target of £1 trillion in exports not been reached.
• In terms of the Northern Powerhouse, only 1% of infrastructure pipeline projects are in the North East, and 97% of senior-level jobs is outsourced to London.
• "Mates rates" corporate tax deals are something the Conservatives will be remembered for.

Budget 2016 papers are available here.