Pre-Budget Report 2008: summary for SMEs
Article Date: Nov 24 2008
The PBR has mixed news for SMEs
The second Pre-Budget Report from Chancellor Alistair Darling contains a number of proposals that will affect small and medium-sized enterprises.
Those changes are summarised below.
VAT reduction: A cut in VAT from 17.5 to 15 per cent, effective from 1 December until the end of 2009, should help growing businesses by encouraging consumers to spend.
Income tax hike: A new top rate of income tax of 45p in the pound, effective from April 2011, will reduce the share of company profits that ends up in some entrepreneurs’ pockets.
National Insurance increase: From April 2011 there will be an increase of 0.5 per cent in all rates of national insurance contributions, for both employees and employers.
Corporation tax rise deferred: The planned increase in corporation tax for profits under £300,000 from 21p to 22p in the pound has been deferred until 2010, providing some temporary relief for small businesses.
Empty commercial property relief: empty commercial properties with a rateable value of less than £15,000 will be exempt from tax.
Taxes on foreign profits: tax breaks on foreign dividends will be offered to medium-sized and large companies, although the extent of the relief has yet to be announced.
Flexibility on tax payments: businesses struggling to pay their tax bills will be able to spread payments over a timetable that suits them.
Offsetting losses against taxes: currently, businesses can offset losses against profits they have made in the last year, reducing their corporation tax bill. This will now be extended to the last three years' profits up to a limit of £50,000.
Business finance: an extra £7 billion of finance will be made available to SMEs, £4 billion of which is coming from the European Investment Bank. Another £1 billion has been earmarked for a temporary Small Business Finance Scheme, which will make loans available of between £1,000 and £1 million. A lending panel is being set up to monitor bank lending, which will include representatives from banks and businesses.
