From April 2017, 600,000 small firms will not have to pay business rates, while some 250,000 will pay less in business rates. Osborne said that the 600,000 small businesses relieved of paying business rates from next April would see an annual saving of nearly £6,000.
Not only this but from April 2018, Class 2 National Insurance Contributions (NICs) for self-employed people will be scrapped, and Capital Gains Tax at the higher rate will drop from 28% to 20% from April 2016 with the basic rate dropping from 18% to 10%.
Policy director at the Federation of Small Businesses, Mike Cherry said: “The chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates.”
The chancellor also announced a number of reforms designed to help small businesses cope with what he called “the great unfairness” they faced when trying to compete with some suppliers selling goods online.
He has introduced two new tax-free allowances worth £1,000 a year for so-called micro-entrepreneurs, which will come into effect from April 2017. These are for people who make money from occasional jobs or through renting out property they own.
Although Ed Molyneux, CEO and co-founder of FreeAgent, agrees that on first look there seems to be good news for small business owners, he thinks “the Budget is also a bit of a missed opportunity when it comes to small business tax reform.”
“There’s very little information about how the Government actually plans to make tax simpler for self-employed people, or if it plans to follow through on any ideas put forth by the Office of Tax Simplification other than a closer alignment of income tax and NI contributions.”
There is also some bad news for personal service companies contracting in the public sector as rather than just being able to accept the assurances of their PSCs about tax and IR35, as they do now, the Budget says state engagers face a new “duty” to ensure all PSCs they use pay enough tax.
Public sector bodies will be responsible for determining the PSC contractor’s IR35 status and deducting income tax and employees’ NI, in the event that the contract is directly with them. Where the contract is via an agency or third party, it will be the party closest to (paying) the PSC who will be responsible for deducting income tax and employees NI.