Small businesses can rejoice today after the government permanently extended its business rate relief scheme, and cut the overall level of corporation tax to 17 per cent.
In a speech heavy on mentions for shopkeepers, pub landlords and hairdressers around the UK, Chancellor George Osborne announced in today’s Budget that the small business rate relief threshold will be more than doubled, meaning properties with a ‘rateable value’ of below £15,000 will be exempt from the tax.
Business rates are a controversial tax on non-residential properties such as shops, restaurants and factories. They are calculated based on the market value of the property, known as the ‘rateable value’.
Celebrating: Small businesses will have their tax relief permanently extended
Previously, the rate relief scheme had been extended one year at a time, meaning that SMEs were forced to wait and see whether they would have to stretch their budget accordingly.
In his Budget speech, Mr Osborne said: ‘In total, half of all British properties will see their business rates fall or be abolished altogether.
‘And to support all ratepayers, including larger stores who face tough competition and who employ so many people: we will radically simplify the administration of business rates, and from 2020, switch the uprating from the higher RPI to the lower CPI.
‘That’s a permanent long term saving for all businesses in Britain.
‘A typical corner shop in Barnstaple will pay no business rates. A typical hairdressers in Leeds will pay no business rates. A typical newsagents in Nuneaton will pay no business rates.’
The Chancellor says he will fund the relief by raising £9billion in a crackdown on multi-national corporations that trade in the UK but swerve tax payments by being domiciled overseas.
He claims that as a result of these measures, half of all properties will see their business rates either fall or disappear.
The changes mean that 600,000 small businesses won’t pay any business rate tax, giving them an annual saving of more than £6,000, while a further 250,000 firms will see their rates cut.
Business rates will also be linked to consumer price inflation from 2020, a move likely to please the Federation of Small Businesses and others who have lobbied for such a switch.
Mike Cherry, policy director at the Federation of Small Businesses, said: ‘The combined measures announced on business rates – the single biggest tax cut in today’s Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform.’
Currently, the tax tracks retail prices measure of inflation, a measure that moves higher than the consumer prices index because it takes into account the cost of housing, which has increased disproportionately quickly compared with other factors.
Crackdown: Companies such as Amazon have been criticised in the past for not paying UK corporation tax
Meanwhile, the Chancellor estimates more than one million companies will benefit from his corporation tax reduction. The tax, which currently stands at 20 per cent, will fall to 19 per cent next year and 17 per cent by 2020.
£1,000 TAX RELIEF FOR EBAY SELLERS AND AIRBNB HOSTS
Osborne also pulled something out of the hat for ‘micro entrepreneurs’ who taking part in the ‘sharing economy’.
From April next year, people renting out their homes on websites such as Airbnb, or selling goods via the likes of eBay, will get a £1,000 annual allowance for ‘property and trading income’, in what George Osborne called a tax break for the digital age.
Overall, the cuts to corporation tax between 2010 and 2021, will represent almost £15billion, according to treasury estimates.
Anil Stocker is co-founder and CEO of peer-to-peer finance firm MarketInvoice. He says the Chancellor has used this budget to ‘redress the balance’ between the David and Goliath’s in British businesses.
‘The Chancellor has finally put small businesses at the core of his economic plan. For a long-time small business owners have felt ignored by the Chancellor in favour of the world’s largest multi-nationals. Today he began to redress that imbalance.
‘Small businesses want real action that affects their everyday business lives in a clear and positive way. Cutting taxes on small businesses by stopping the sweetheart tax deals for large multi-nationals is the number one thing business owners wanted to see from today’s Budget, and the Chancellor has delivered.
The newsagents: ‘Rates are a huge burden’
Set to benefit: Ray and Andrea won’t pay any rates
Ray Monelle said the change to business rates would help hard-up newsagents.
He and wife Andrea, both 61, have run Orchard News and neighbouring florists Country Garden in Weston-super-Mare for more than three decades.
They pay around £4,500 a year for both properties, but will be entirely exempt from April next year under the new rules.
Mr Monelle said: ‘We will definitely benefit and many other newsagents will.
‘Rates are a huge burden and some newsagents effectively earn minimum wage because they are paying out so much in rates and staff wages.
‘So this is good news all round for small businesses.’
Fudge shop owners: ‘The national living wage was going to hit us hard, but now we can afford it’
Thrilled: Joel and Mary outside one of their shops
Fudge shop owners Joel Riley and Mary Keir were thrilled to discover they may have their business rates bills slashed from nearly £10,000 to a few hundred pounds a year.
The couple, aged 26 and 29, run a chain of three Roly’s Fudge shops in the Cornish holiday towns of Newquay, Padstow and Fowey.
They currently pay around £9,500 in total, but under the new rules two of the shops will be exempt.
The other has a rateable value of £12,750 – just over the £12,000 threshold at which tapered relief begins, meaning they will pay a reduced rate.
Mr Riley said: ‘It is brilliant as rates are a big part of our costs currently.
‘The introduction of the national living wage was going to hit us quite hard, but this means we can afford it and pay our other staff more too.
‘I’d much rather our money went to paying staff more and having happy staff, than straight to the Government.’
The hairdresser: ‘This means we can take on more staff’
Proud: Barrie employs 70 people in five salons
Hairdresser Barrie Stephen will save enough under the new system to take on a new member of staff.
He owns five salons in Leicestershire, two of which will be completely exempt from business rates and another of which will pay a smaller tapered rate.
From the two smaller salons alone he expects to save around £12,000 a year from his rates bill.
Mr Stephen, 45, said the Chancellor was ‘making all the right decisions for small businesses’, adding: ‘I will open the champagne. This means we can take on more staff, an apprentice or put it towards opening another salon.
It’s an amazing benefit and very welcome.’
Mr Stephen employs 70 people across his network of salons.
The business turned over £2.5million last year and he paid himself a salary of £250,000. He said he was ‘proud’ to be a top-rate taxpayer.
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