Small Firms face Corporation Tax Hike

Many of us will remember Gordon Brown's attempt to encourage
enterprise in 2002 by introducing a nil per cent starting
Corporation Tax rate, for the first £10,000 of profits. This
move resulted in thousands of sole traders and partnerships
setting up limited companies to take advantage of the changes.

Now it seems this incentive was just a little too successful,
as the Chancellor has just scrapped the nil per cent rate in
his recent Pre-Budget Report (the change will take effect
from April 2006). The zero rate and non-corporate
distribution rates will be replaced by a new 19% rate on
profits, in an attempt to enable "simpler calculations".

Accountants PKF said that thousands of small companies face
an extra tax bill of up to £1,900 a year because of the removal
of the nil starting band of corporation tax.

The Times published an article, "Three years on, small firms
lose limited tax break" which is worth a read here.

Our friends at Freelance UK have also published an excellent
summary of the Pre-Budget report changes and how it may
affect small traders and freelancers.