Budget 2010 - A Brief Summary for Small Businesses
24th March 2010
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The budget brought a pleasant surprise in that the Annual Investment Allowance (AIA) is doubled from £50,000 to £100,000 from next month and there is currently no expiry date. This means that businesses can write off 100% of qualifying expenditure up to £100,000 each year against taxable profits. Whilst this is good news, whether it encourages capital investment remains to be seen as few businesses are able to utilise the current £50,000 AIA due to cash restraints. This headline grabbing statement may actually have little benefit to small businesses.

However, there is little bad news for small businesses:

• VAT rates remain the same. Registration & deregistration thresholds increase from 1 April to £70,000 and £68,000 respectively.

• No change in corporation tax rates. The main rate will continue at 28% for 2011/12. The small profits rate is still due to increase from 21% to 22% from 1 April 2011 if the 2009 Pre-Budget Report proposal is carried through.

• There are no changes to the the Business Support Service so business should still be able to defer their tax payments for the next year - but expect more rigorous questioning!

• Business rate taxes for small businesses will be reduced for one year starting from October 2010. This will impact on 345,000 businesses who may get a business rate tax holiday.

• The chancellor confirmed the basic rate of income tax will be 20%, the higher rate will be 40% and the additional rate will be 50%. Personal allowances will remain at their existing amounts.

• Entrepreneuer's lifetime limits are to be raised to £2m (from £1m) on which they will pay just 10% capital gains tax, instead of the main rate of 18%.

• The inheritance tax threshold will be frozen for four years at £325,000

As this budget is announced before a General Election, some of these changes may be overturned after the election - wait and see.

If you would like more information or tailored advice for your business, please get in touch. We offer a free initial consultation and would be able to advise based on your specific circumstances. You can also sign up for our free informative start-up business guide and regular tax tips through our website www.accountancyoffice.co.uk.

Sarah Sallis
Chartered Management Accountant
The Accountancy Office Limited
e-mail: hello@accountancyoffice.co.uk

The Accountancy Office takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted.

About the Author

Sarah S

Member since: 30th June 2011

I am a Chartered Management Accountant and Director at The Accountancy Office Limited who specialise in providing professional and affordable accountancy and tax services to small businesses.

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