Budget 2011 – key points for small businesses

The Chancellor delivered his second Budget on March 23rd 2011.

Here are the key points, which include specific measures to boost enterprise, cut red tape for small businesses, as well as a number of pre-announced changes to tax rates, bands and other allowances.

Key Points – for Small Businesses

  • According to the Chancellor, there will be no significant winners or losers in the Budget, which is intended to be ‘fiscally neutral’
  • Annual GDP growth is expected to reach 1.7% in 2011, 2.5% in 2012, and further rises in subsequent years.
  • Inflation may well stay between 4 and 5% during 2011, before dropping below 3% in 2012.
  • Government borrowing set to fall from £146bn in 2010/11 to £29bn in 2015/16.
  • Income tax relief via VCTs and the EIS has been increased to 30%.
  • The VAT registration threshold was increased to £73,000 (de-registration threshold to £71,000) from April 1st 2011.
  • The Chancellor said that taxes need to be fair, simple to understand, and easy to comply with.
  • 43 tax reliefs to be abolished following recommendations by the Office of Tax Simplification.
  • Consultation on the merger of income tax and National Insurance will be launched. It will take several years to complete.
  • The main corporation tax rate will be reduced by 2% in April from 28% to 26%, not 1% as previously announced. However, the “small profits” rate will still drop just 1% to 20% as previously announced.
  • Business rate relief is to be extended until October 2012.
  • From 6th April, the lifetime allowance for Entrepreneurs’ Relief will double to £10m.
  • The personal tax allowance will rise by a further £630 in April 2012, on top of the £1,000 rise which takes effect from April 6th 2011.
  • Chancellor made it clear that the 50% additional income tax rate is ‘temporary’, but now is not the time to make changes.
  • 21 new Enterprise Zones will be created, free of business rates, simpler planning restrictions and with superfast broadband. The first ten will be in urban areas.
  • New measures to clamp down on tax avoidance, which could raise over £4bn over the course of this Parliament.
  • IR35 will remain in place, as abolition could cost the Treasury a substantial amount of tax revenues.
  • Government to scrap unnecessary red tape and regulations for small companies.
  • New 3 year moratorium for new businesses on new domestic regulations.
  • The small companies’ R&D tax credit is set to rise to 200% this year, and 225% in 2012
  • Fuel duty is to be cut by 1p/litre from 6pm today (23rd March). The planned April 2011 inflation increase in duty has been deferred until 2012.
  • HMRC’s ‘Time to Pay’ scheme will remain in place.
  • The small business rate relief scheme will be extended for another year. It was due to expire on 30th September 2011.
  • An additional £100m for new science facilities and more generous tax credits for small business research and development.
  • 50,000 additional apprenticeships and 100,000 work placements for young people.
  • £3bn for a Green Investment Bank, which plans to generate an extra £15 billion in private sector investment in green projects and low carbon energy.
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