Budget : PwC comments on impact for small to medium sized businesses

Privately owned businesses will have welcomed the Chancellor's opening statement  that this is a Budget that rewards work and backs business.  The obvious question is will they feel he delivered that?

There were a number of positives:

• reduction in corporation tax rate to 24% from April 2012 (originally expected 25%) and further reduction to 23% then 22% in subsequent two years;
• reduction in higher income tax rate from 50% to 45% from April 2013 - the most concrete signal yet that the 50% rate is indeed a "temporary necessity";
• for those who have spent their working lives building their business and are now looking to save for retirement, no further tinkering today with pensions reliefs;
• a particular win for those companies who can use the Enterprise Management Incentive (EMI) - an increase in the limit per individual to £250,000 (subject to EU state aid approval) and a proposed extension of Entrepreneurs Relief to shares acquired through EMI.

Tracey Bentham, Head of Tax at PwC in the West & Wales, commented:

"For university research led start-ups, the proposed consultation on extending EMI to university academics will be welcomed and very small businesses (less than £77,000 turnover) will be eager to see what comes out of the proposed consultation on a simpler basis of tax accounting.

"What they didn't see is a review of Capital Gains Tax - many believe there would be a benefit to enterprise in having a differential CGT rate to act as a broader incentive for individuals with private wealth to invest in unlisted trading businesses. 

"Those who compete Internationally for talent,, whilst welcoming the Chancellors' resolve in reducing the higher income tax rate to 45%,  will remain concerned that the UK income tax rate (at 47% including uncapped NIC) is still comparatively high. They will be hoping that this is a step on  a journey to  keep the UK competitive and "open for business."

 

Contact details
Email: Tracey Bentham
Tel: + 44 (0) 117 928 1194