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March 20, 2013

Budget 2013 delivers big savings on NICs for small firms

Businesses are to save £2,000 on employer National Insurance contributions (NICs) from 2014, thanks to a new Employment Allowance announced by George Osborne in his 2013 Budget. This means that some 450,000 small businesses (about one third of all employers) will pay no employer NICs at all from April 2014.

This was one of the headline initiatives in a Budget that certainly had some good news for small firms but still left many asking how Osborne is proposing to boost growth as the Chancellor had to downgrade the UK’s growth forecasts again.

Other big announcements included a reduction in the corporation tax main rate to 20% (from April 2015) — bringing it in line with the small profits rate and creating one simple rate for all businesses, no matter what size they are. This gives the UK the lowest business tax of any major economy in the world. However, this did not offer any immediate advantage for SMEs and there was no action on business rates — something that had been strongly lobbied for by the major business bodies.

A key announcement was the scrapping of the planned 3p fuel duty rise. A major new initiative to get the housing market moving was also launched. The new help-to-buy scheme will provide £3.5bn in capital spending over three years for shared equity loans and a new mortgage guarantee was also announced.

There will also be a considerable investment in infrastructure from 2015-16, with Osborne announcing that £3 billion a year will be spent up to 2020 — representing a total investment of £15 billion.

Osborne also revealed that the Bank of England would adopt new policies to stimulate the economy following discussions with both the outgoing governor, Sir Mervyn King, and his successor, Mark Carney.

Other announcements aimed at businesses included:

  • Capital gains tax relief for employees buying businesses from their employees;
  • Capital gains tax holiday for investment in the Seed Enterprise Investment Scheme extended;
  • A doubling of the size of the loans that employers can offer tax-free to pay for items such as season tickets, to £10,000;
  • Government procurement from small firms to increase fivefold;
  • R&D tax credits increased to 10%;
  • New tax reliefs for creative industries including animation, TV and video games;
  • Tax relief for investment in social enterprises;
  • The go-ahead for Doug Richards’ proposed overhaul of apprentice schemes
  • The flat-rate pension to be brought forward to 2016
  • Enterprise funding to be devolved to Local Enterprise Partnerships, as recommended by Lord Heseltine.

There was, however, little significant detail on how to get banks lending again — aside from the fact that the Funding for Lending scheme may be extended and the announcement that the state-run business bank will be fully operational by 2014.