If you’re the owner of a small or medium sized business, you’ll know just how big of an impact small changes in tax rules can have on a company’s finances.
That’s why small and medium sized business owners where watching the Chancellor’s recent budget more keenly than almost anyone else. Looking to see how the new changes will affect them and their business, SMEs across the country will be trying to work exactly what the new budget means for them.
One of the biggest changes to affect small and medium sized businesses is the raising of the threshold for business rates. At the moment, businesses that occupy commercial premises worth £6,000 a year in rent or more have to pay business rates.
These rates vary across the country but are generally calculated using a formula that takes into account the size of a business and its location. Often extremely costly, business rates make it hard for small and medium sized businesses to establish themselves in the market.
Under the Chancellor’s new plan, the annual threshold for small business rates relief is to be raised from £6,000 to £15,000 while the higher rate threshold will also be increased from £18,000 to £51,000. This should benefit around 850,000 businesses across the UK.
Tax breaks for micro-entrepreneurs
The Chancellor created two new tax free allowances in his budget for ‘micro-entrepreneurs’: people who make occasional profits through selling products online or renting out their home, car or other services via the ‘sharing economy’.
Under the new rules, these low income startups won’t have to pay tax on the first £1,000 they earn, making life a lot simpler for those trying to make a bit of extra cash on the side.
Changes to stamp duty will affect businesses that are looking to buy or sell their premises. Under the new rules, the commercial stamp duty rate of 0% will apply to purchases up to £150,000, there will be a tax of 2% on the next £100,000 and the 5% top rate will apply above £250,000. There will also be a new 2% rate for high-value leases with a net present value of more than £5m per year.
The chancellor also announced a number of reforms designed to help small businesses cope with unfair competition from foreign enterprises. Under the new rules, overseas retailers won’t be able to store goods in the UK without paying VAT, something that should level the playing field when it comes to online selling.
Overall, the new budget is good news for small businesses. Growing companies should find it easier to thrive while increased investment will make it easier to drive business forward, increase profits and make companies more successful.
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