March 2007 - Small Business News

How Will the Budget 2007 Affect Your Business?

This year’s budget is a very mixed bag for small and medium businesses, with some welcome ideas, some not so welcome; and one extremely unwelcome.

Here are the main points of the budget that could affect your business: 
 

• The tax rate on small companies will be raised from 19p to 20p in April 2007 and to 22p in April 2008. Whilst some of this cost is offset elsewhere, it is not a welcome move.
   
• Minimum Wage – The minimum wage will go up in October 2007, however the good news for businesses is that the increase will be much more cautious than the past few years; putting less strain on small businesses.
   
• The 10 pence rate of income tax will be removed from April 2008, and the basic rate will be cut to 20 pence. This will benefit some employees and cause problems for others.
   
• Corporation tax will be cut from 30p to 28p in April 2008; this might help larger small businesses; but many will ask why larger business are getting tax cuts while the 4 million small ones are getting an increase.
   
• 100% relief will be available for small businesses on capital investment up to £50,000 from April 2008; whilst the temporary 50% will be extended until the new rate comes in. This is a welcome incentive for small businesses to invest.
   
• A tax credit of 175% will be introduced for research and development by small businesses; while a tax credit will be introduced for environmental investment. These are also welcome incentives for small businesses to invest in research and worthwhile environmental causes; especially with the market for environmental products and services expected to grow rapidly in the next few years.
   
• Training funds of up to £3000 will be made available for small businesses that take on employees needing to acquire very basic skills. This will help businesses that are struggling to find suitable employees; or those who like to employ less advantaged candidates that may not have had a typical education.
   
• Fuel duty will rise by 2p a litre from October 2007 and a further 1.8p in 2008. Whilst vehicle excise duty will go up by 30% for the top band, and down by 30% for band B vehicles. This is the usual kind of duty increase, which will affect all businesses; but especially those with large transport or travel requirements.

A mixed budget for small businesses, most will probably find they are worse off, though some will undoubtedly benefit from the new tax credits and training funds.