The Chancellor delivered a bleak economic forecast when he stood up this afternoon, admitting growth in 2013 would be 0.6% – half the 1.2% he predicted four months ago in the autumn statement. However, growth forecasts for the economy in future years are forecast to be in more positive territory, with predictions of 1.8% growth in 2014, 2.3% in 2015 and 2.7% in 2016.
The Chancellor is looking to business to drive this growth, and there have been announced a number of measures which I’m sure will be welcomed by our business clients:
The main rate of corporation tax will reduce to 21% in 2014, and then further to 20% from 2015 onwards, which means the same rate applies to all companies and the existing complexity caused by the small companies rate of tax and marginal relief will no longer exist.
In a bid to help drive growth, from April 2014 the government will introduce a new “employment allowance” that will reduce each company’s NIC bill by £2,000. The Treasury document explained that every business will be able to employ one worker on a salary of £22,400, or four employees working full time on the adult National Minimum Wage, without paying any employer NICs at all.
This is a measure which will be welcome news for all our business clients.
As previously announced, pension contribution limits will reduce from £50,000 to £40,000 from 2014/2015, so now is the time to make optimum contributions!
As the lifetime limit will also be reducing to £1.25M, protection is available to guard against possible punitive tax charges – this will especially apply to those clients in defined benefit schemes.
Loans to employees
At the moment a company can loan an employee up to £5,000 interest free without any benefit in kind arising. From 6th April 2014, this will increase to £10,000. This could be used as an alternative way of rewarding staff.
There is also some welcome news on the personal side:
The personal allowance will be increased to £10,000 from 2014-2015, which means they reached the promise made at the election a head of schedule.
From the autumn of 2015, working parents will be able to claim tax-free childcare vouchers, worth £1,200 per child to subsidise the cost of childcare for every child under five. Parents earning up to £150,000 will be able to claim back up to £1,200 of childcare costs a year.
The Chancellor extended CGT relief for re-investing gains in Seed Investment Enterprise Scheme (SEIS) shares during 2013-14 or the following year. The SEIS, launched at Budget 2012, offers 50% income tax relief on investments made into small, early-stage companies. This extends the CGT holiday available for 2012-13, but as the extension for CGT is only for half of the investment – in 2012-13 it was for up to £100,000.
Help to Buy
The Government has announced two measures in order to boost the housing market, by way of a shared ownership plan and a mortgage guarantee scheme. Whilst this is a welcome boost for our construction clients, and those who may no longer need to dip into their own savings to get their offspring on to the property ladder, there are some concerns that it may create another housing bubble.
This is clearly a Budget for growth, and whether it is successful remains to be seen. As a small business owner myself, I will certainly be raising a (slightly cheaper) pint glass to its success this weekend!