As football is on everyone's minds today, let me borrow a popular metaphor and say that yesterday's Emergency Budget is a game of two halves – of cutting costs and raising revenue.
The hike in VAT to 20%, starting on 4 January 2011, adds more admin for SMEs. It raises prices and could depress spending, but it gives the exchequer £13bn a year.
SMEs will be pleased that corporation tax has dropped by 1% for those with profits of less than £300,000. Large companies also pay less, as the rate goes down from 28% to 24% over four years.
The national insurance threshold for employers will rise by £21 (from £110 to £131) a week from April 2011, so SMEs will not have to pay NICs for around 650,000 workers. The 1% Labour increase for employees has not been reversed.
There's a tax holiday for start-ups outside London and the South East. New businesses will not have to pay NIC for the first £5,000 for up to ten employees for their first three years. Up to 400,000 businesses could benefit from the scheme.
Capital gains will be taxed at either 18% or 28% depending on whether tax is paid at the basic or higher rate. Overall, this gives £3.4bn back to business in the first year.
The threshold for Entrepreneurs’ Relief (or CGT investment allowance) is up from £2m to £5m.
But capital allowances for plant and machinery will be cut from April 2012 from 20% to 18% and for longer life assets from 10% to 8%. The annual investment allowance goes down from £100,000 to £25,000.
The insurance premium tax goes up from 5% to 6%, though this is still below the European average.
The Enterprise Guarantee scheme will be extended.
To balance his budget Osborne has frozen child benefit and public sector pay, cut housing benefit and disability living allowance and squeezed spending by government departments.
According to the
BBC 'UK households, on average, will be about £400 a year worse off... with the poorest 10% losing £200 and the richest £1,800, although the poorest will be hit harder than most as a percentage of their income.'
So do you think the Chancellor is on a winning streak?
