On 8th July, George Osborne gave his first budget statement since the Conservative party won the General Election in May. During his speech in the House of Commons, Osborne promised to transform Britain into a ‘‘higher wage, lower tax, lower welfare’’ country.
How will small businesses play a part in this transformation?
One of the ways the Chancellor plans to follow through on his promise is by cutting corporation tax by 18 per cent within the next 5 years.
This is more than likely to have more of an impact for larger companies rather than small and micro-businesses, but any money saved from paying the levy can be used to fund the increase in the national minimum wage.
The Chancellor announced that the national minimum wage will rise to £7.20 an hour from April 2016, and then rise to £9 an hour by 2020. Many small business experts feel that this announcement will be a challenge to business owners who already have a small budget at their disposal.
‘‘The introduction of a new National Living Wage for over 25 year olds, set at £7.20 an hour from next April, will pose significant challenges for many small firms, particularly those in the hospitality, retail and social care sectors,’’ stated John Allan, national chairman of the Federation of Small Businesses (FSB).
Some good news for SMEs however is that there will be a £1000 cut in Employment Allowance.
This will allow microbusiness owners to reduce their wage bill. According to the government, businesses will be able to ‘‘to employ 4 people full time on the National Living Wage and pay no National Insurance at all.’’
However, there are some pitfalls concerning the drop in Employment Allowance. Bosses will only be able to offset the cost for the first 2000 hours. After that, the business will potentially be losing money unless they can make some profit under the corporation tax cuts.
Small business owners around the country have given their verdict on the budget. In Hartlepool, business owners have concerns over the minimum wage increase.
‘‘It is good that the living wage is moving that way but it is a big jump. If someone is working 40 hours, that could be an extra £80 a week for a business,’’ stated Colin Griffiths, a business consultant and Federation of Small Business Hartlepool branch vice chairman.