Love him, well someone must, or loath him, The Chancellor of the Exchequer has featured heavily in this summers news, especially in the business press. But was this summer’s Budget really The Business Budget?
Wednesday 8th July was the monumental day that Mr. Osborne delivered the first Conservative Budget in 20 years. The central theme of his announcement focussed on weaning people off benefits and getting them back into work. However, the Summer Budget has also caused division amongst the ranks of small companies; with several changes to tax, an increase to the National Minimum Wage and new legislation affecting company directors, Osborne has succeeded in splitting the opinions of business owners across the country.
On one hand the Budget sparked delight for SMEs, and even micro-businesses, who were thrilled to see Corporation Tax slashed and an increase made to the National Insurance Employment Allowance. On the other, Osborne spoke of wage increases, a shake up of the dividend system and cuts to the Annual Investment Allowance- an incentive scheme originally designed to help small companies make tax-deductible investments in equipment and machinery, which in turn was intended to encourage investment into future productivity and growth. The Summer Budget 2015 really was a mixed bag and seemed to play up to the Tory-stereotype of giving with one hand whilst taking with the other.
At first glance, the Summer Budget seemed to not contain much good news for small businesses. In fact, it almost seemed to discourage growth and put into place restrictions which would push businesses to shut-up shop and ship out. But ever the optimist, Ive tried to trudge through the murky waters of Osbornes message and find some glimmers of hope for business owners, and, believe it or not, I actually have!
- The reduction in Corporation Tax and the increase to National Insurance Employment Allowance counter-balance the increase to the National Minimal Wage, so most SMEs wont feel a huge degree of change. Try to look past the negative-hype surrounding this Budget and you can see that the changes may be minimal and, in many cases, non-existent.
- The Budget brought forth some potential opportunities for business looking to expand or buy an already established company. The removal of the Dividend Tax Credit, replaced with a new tax-free Dividend Allowance of 5,000, will encourage some business owners to sell up. If you are looking to buy an existing company, or dominate your market, some incredible opportunities may present themselves in the coming months. You might be able to buyout your competitor, add a new branch to your business empire, or even take on a reputable company and reap the rewards for minimal effort.
- The improvement to the National Insurance Allowance could encourage the almost 5 million micro-businesses in the UK to take the brave step of expansion and take on more staff. In order to grow, businesses need to take on more people, so this move could spark a huge surge in expansion across the country. Great for the economy, but even better for the small business community.
- The Summer Budget wasnt just about taxes and allowances- it also brought in new changes to how businesses can access finance. Thanks to the Budget, UK lenders will soon be forced into sharing the financial information they keep on small businesses. This will mean that the credit information of unsuccessful SMEs will be available to online platforms that can match them to alternative finance providers. I must add here that I cannot recommend taking out a loan, but it now may be an option that many business owners have not previously been able to access. If you want some guidance on this, speak to a reputable, independent Financial Planner.
- The reduction to the Annual Investment Allowance, dropping from 500,000 to 200,000 may not seem like a positive, but trust me on this one! Initially the proposed allowance was going to be set at 25,000, so actually the 200K figure is not that bad! This move will also make business owners actively think about reducing their costs. For example, why invest in equipment when you can outsource your requirement for a fraction of the price? With some careful business and financial planning, this cut should not be too heavily felt by SMEs.
Any political announcement, especially ones that mention your money, are always going to ignite debate and draw into question numerous issues. The Summer Budget may appear to have painted a negative backdrop for small business owners, but it is important to look past this and maximise the changes to your own benefit. In my mind, there are three courses of action to take: Speak to a tax or financial planning expert and get your business plans in order; look at creative ways to reduce your costs, such as outsourcing tasks or utilising flexible business solutions; and embrace the prospects of growth- many opportunities will start to become apparent and, with some reductions in tax, taking on new employees and expanding your business is increasingly more cost-effective.
If you need any help, guidance or support on this topic, please contact us at The Rural Business Community. Several of our members, such as Efficient Portfolio are experts in business growth and financial planning, so we will know someone who can help.