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Budget 2016: Small business welcomes tax changes Budget 2016: Small business welcomes tax changes
(about 1 hour later)
Small businesses welcomed what they said were long overdue reforms to tax policy as the chancellor doubled business rate relief. Small businesses have welcomed what they said were long overdue reforms to tax policy as the chancellor doubled business rate relief.
From April 2017, 600,000 small firms will not have to pay business rates, while 250,000 will pay lower rates.From April 2017, 600,000 small firms will not have to pay business rates, while 250,000 will pay lower rates.
To fund the giveaway, the chancellor capped debt interest payments used by larger firms to cut their corporation tax bills, to 30% of earnings.To fund the giveaway, the chancellor capped debt interest payments used by larger firms to cut their corporation tax bills, to 30% of earnings.
George Osborne also said corporation tax will be cut to 17% by 2020. George Osborne also said corporation tax would be cut to 17% by 2020.
That will mean the UK has the lowest rate of tax on profits in the G20. Online action
The Treasury estimates that the debt interest rate relief cap, alongside other measures, will help raise £8bn over the next five years. Mr Osborne said his business tax reforms were part of a "Budget for small business".
Dr Adam Marshall, acting director general of the British Chambers of Commerce (BCC), said: "The Chancellor listened to our calls to avoid higher business taxes and costs - and indeed moved to lower them in a number of areas.
"He has finally taken real action to lessen the crushing burden of business rates, and sharpened incentives for entrepreneurship and investment."
Mike Cherry, policy director at the Federation of Small Businesses (FSB), said: "In a Budget constrained by both the need to reduce the deficit and the economic outlook, the chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates."
'Blazing a trail'
Hailing his business tax reforms as part of a "Budget for small business", Mr Osborne said: "Britain is blazing a trail. Let the rest of the world follow."
The chancellor announced he was permanently raising the threshold for small business rate relief from £6,000 to a maximum of £15,000 and increasing higher rate relief from £18,000 to £51,000.The chancellor announced he was permanently raising the threshold for small business rate relief from £6,000 to a maximum of £15,000 and increasing higher rate relief from £18,000 to £51,000.
He estimated that the 600,000 small businesses now relieved of paying business rates from next April, would see an annual saving of nearly £6,000. He said that the 600,000 small businesses relieved of paying business rates from next April would see an annual saving of nearly £6,000.
The chancellor also announced a number of reforms designed to help small businesses cope with what he called "the great unfairness" they faced when trying to compete with global giants like Amazon and eBay. Mike Cherry, policy director at the Federation of Small Businesses, said: "The chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates."
Mr Osborne said the government would take further measures to tackle the problem of overseas retailers storing goods in the UK and then selling online without paying VAT. The chancellor also announced a number of reforms designed to help small businesses cope with what he called "the great unfairness" they faced when trying to compete with some suppliers selling goods online.
He also introduced two new tax-free allowances worth £1,000 a year for so-called micro-entrepreneurs: those people that make up to £1,000 from occasional jobs or from renting out property they own such as a driveway or garage storage. Mr Osborne said the government would take measures to stop overseas retailers storing goods in the UK and then selling the goods online without paying VAT.
He also introduced two new tax-free allowances worth £1,000 a year for so-called micro-entrepreneurs: people who make money from occasional jobs or through renting out property they own.
'Strong signal'
The Treasury estimates that the debt interest rate relief cap, alongside other measures, will help raise £8bn over the next five years.
Among those other measures was the announcement that firms making an annual profit of over £5m would face the prospect of having the amount of past losses they could carry forward to offset their corporation tax bill capped to 50% of current profits.
Carolyn Fairbairn, director general of the CBI business lobby group, said: "The reduction in the headline corporation tax rate sends out a strong signal that the UK is open for global business investment, and reforms to interest deductibility are rightly in line with the international consensus.
But she added: "Changes to the tax treatment of losses will make it harder for larger scale-up firms and companies that have been through tough times to play their part in the recovery."