Budget update for UK business

Wednesday, 23rd March 2011

The latest UK Budget has been announced today by Chancellor of the Exchequer, George Osborne. Many business owners have been hoping to see a reduction in taxes to help lift the country out of recession, but with the large deficits requiring repayment, the predictions have been gloomy. The Budget builds on announcements in the Spending Review of 2010 and the June Budget from 2010.

Fuel duty has been cut by 1p per litre which should offer a discount for the millions of company car drivers. Early indications are that it will be difficult to see which petrol stations will actually pass on this saving to drivers, so any real savings for business are going to go undetected. Inflation only increases in Fuel Duty will be deferred until 1 January 2012 and the April 2012 increase will now be implemented on 1 August 2012. Tobacco has seen its duty rise this should not affect business unless part of your income is made from the sale of tobacco.

The biggest plus for business is the reduction in the main rate of Corporation Tax to 26 per cent from April 2011, with further yearly reductions of 1 per cent until 23 per cent is reached in 2014. Whilst any reduction in tax is a good thing for any company, the actual effect felt by business will be minimal and this will also be affected by the type of business you run.

There is also a moratorium exempting micro businesses and new start-ups from new domestic regulation will be introduced for three years from 1st April. The lifetime limit for Entrepreneur's Relief will be doubled to 10 million pounds.

Finally, the Government had announced that it will consult on options for integrating the operation of Income Tax and National Insurance Contributions. This may help some smaller businesses with their accountancy and payroll administration. There will also be new rules which will allow groups based in the UK to compete more effectively with those based overseas, although the exact nature of these rules is still to be confirmed.

Cost Saving Expert is pleased to see the reduction in tax for some businesses, but the blanket coverage for the majority of these rules makes it difficult for any one business to take an advantage out of the overall budget. The impact of the recession is going to be felt well into 2011, so now it is essential to review your other business costs to help reduce your overall spend and this will improve your profits.

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