 Business tax changes less painful than expected
22 June 2010: In his first Budget, George Osborne was expected to raise taxes and cut spending drastically, but PKF Accountants and business advisers welcomes the news that businesses will not be hit too hard.
 |
 | Lisa Macpherson, National Director of Tax at PKF said: “The whole package of measures for business is fairly balanced and to be phased in carefully, so it should help the recovery overall.” |
Corporation tax cuts
The main rate of corporation tax will reduce to 27% from April 2011 with successive reductions to 24% by April 2014: the small companies’ rate falls to 20% from April 2011.
Lisa says “Announcing cuts in the main rate of corporation tax for the next four years and a program of corporation tax reforms will reassure large businesses that the UK business tax regime will remain competitive in the medium term.”
Capital allowances to be cut
From April 2012, the rates at which the capital cost of plant and machinery can be written down for tax purposes will fall – from 20% to 18% for most assets and from 10% to 8% for long life assets. The annual investment allowance will also reduce from £100,000 to £25,000, but the write off will continue to be at 100% of the qualifying cost.
Lisa says: “Delaying this reduction in allowances until 2012 is a wise move and limiting the cut to 2% means that the change should not affect long term investment decisions.”
National insurance contributions rise
The previous Government’s proposed 1% increase in employers’ NIC from April 2011 will go ahead, but the impact on employers will be mitigated by raising the threshold at which they start to pay NIC on each employee’s salary. The £21 per week increase in the threshold means that employers will save up to £150 per employee compared to the full 1% increase.
Lisa says: “The current proposals to ‘stop the jobs tax’ are not as generous as employers may believe: an employer will pay more NIC for every employee paid more than £20,700 per year. The above changes do not mean employers’ total NIC bills will go down in 2011/12: they just won’t go up as much as they could have.”
VAT rise
The standard rate of VAT will increase to 20% from 4 January 2011.
Lisa says: “While many businesses will have difficult decisions to make about passing on the VAT increase to customers, at least delaying the increase until January gives them more time to prepare for the change. In addition, the sensible start date of 4 January will avoid the issues businesses experienced with the previous change which took effect from midnight on New Year’s Eve in most circumstances. The wider effect on inflation should also be reduced as the impact of the January 2010 return to 17.5% will drop out of the figures by then so, hopefully, the new increase should not have a large knock on effect on interest rates.”
– ends –
For further information, please contact:
Jane Murray, PR, 020 7065 0135, jane.murray@uk.pkf.com
Notes to Editors:
- PKF is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
- PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
- PKF (UK) LLP is a member firm of the PKF International Limited network of legally independent firms. The PKF International Limited network has around 15,000 people operating in 120 countries around the world.
|