This year’s budget is to be announced on Wednesday 19 March. With this being the last Budget which can have any major significance on the 2015 General Election, the Chancellor will be keen to address economic growth and the continued cuts to public spending. I take a look at what effects the budget may have on individuals and small businesses.
During the parliament, we have seen the personal allowance (the income threshold before an individual has to pay any tax) reach £10,000. This was the target level set by Nick Clegg in 2010 and it will be interesting to see whether a further increase is planned.
Income Tax Rates
We have seen the top rate of tax fall to 45%, cut from 50% after pressures from various groups. There has been a push by parties on the left to move the rate back to 50% but the Chancellor is not expected to move on the rate. I would expect to see some movements on the 40% and 45% thresholds, which may move some higher level earners into higher rates of tax.
Capital Investment Allowances
In order to encourage economic growth and investment, we have seen the government’s investment incentive, the Annual Investment Allowance increased from £25,000 to £250,000. The tax incentive, which gives businesses a 100% deduction from profits for amounts spent on capital investment, is a significant tax saver for small businesses. The UK’s level of investment has been poor over the past few years, so expect to see an extension to the AIA scheme.
High levels of business rates have been detrimental to the British high street during the recession. There has been calls for rates to be reduced for wholly owned British businesses as an incentive to kick start local economies by encouraging small businesses to move back to the high street. It will be interesting to see whether the Chancellor opts for this bold strategy to help
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