Budget: Entrepreneurs ‘can earn more’ says Chancellor

ENTREPRENEURS and small business owners breathed a sigh of relief as changes to Capital Gains Tax turned out to be less harsh than feared – and start-ups in the English regions were given exemption from a large part of employers’ National Insurance contributions.

With small business corporation tax reduced to 20%, the Chancellor claimed 850,000 businesses would benefit from the Budget, supporting his claim that private enterprise would lead the UK out of the crisis.

Speculation that CGT would be lifted to as much as 40% from 18% proved unfounded as Mr Osborne announced that higher rate tax payers would pay 28% and everyone else would remain as they were.

Richard Burston, senior manager, Human Capital in Ernst & Young’s Birmingham office said: “People who feared the worst will be slightly relieved of course, but the difference between the highest rate in CGT – 28% – and income tax at 50% – means there is encouragement for people to invest in assets.” 

Entpreneurs will now be able to earn more from the sale of their businesses before paying the full CGT rate. The chancellor said the £2m lifetime earnings limit under which CGT is paid at 10% would be raised to £5m.

In an attempt to close the North-South divide, which has seen 10 private sector jobs created in London for each one created in the regions, the chancellor said: “We will shortly announce a new tax scheme to help create new businesses in those regions where the private sector is not nearly strong enough.

“For the next three years anyone who sets up a new business outside London, the South East and the Eastern region will be exempt from up to £5,000 of employer national insurance payments, for each of their first 10 employees hired.

“We aim to have the scheme up and running by September, but any qualifying new business set up from today will also receive help.

“And the Treasury estimate that some 400,000 businesses will benefit – ensuring all parts of our country contribute to a more balanced and sustainable economic future.”

However, for the video games industry, there was bad news. The Chancellor told the Commons he would be scrapping the tax breaks promised to the sector by Alastair Darling in his last budget.

Ernst & Young’s Richard Bursten said: “In terms of encouraging investment, this budget could well result in more entrepreneurs establishing businesses which would also be good.

“But the changes to capital allowance rates means that there’s less incentive for companies to invest in new equipment. Some companies would possibly like to have seen more done to assist them here.

“On a national level, there’s evidence to show that overseas companies look at the headline rates when they are considering where to invest – so there may be benefits there.”