A budget for small business?

As a whole, Budget 2011 wasn’t a big disaster for small business.  In fact, there were a few encouraging signs and allowances given.

Personal Allowance

Will be increased by £630 to £8,105 in 2012/2013.  This is on top of the increase in 2011/2012 from £6,475 to £7,475.  Meaning that employees and (more importantly) directors will be able to earn £600 without having to pay tax or national insurance.

Corporation Tax

Larger companies benefited more here with the announced 2% reduction to 26% in April 2011.  Furthermore, this rate will continue to reduce by 1% year on year until the rate is 23%.  Even so, small company taxation will reduce to 20% as previously announced.

Mileage Rates

The amount per mile that can be claimed for business miles when using your own private vehicle has increase.  From April 2011 the rate will increase to 45 pence per mile for the first 10,000 driven.  The rate in excess of 10,000 miles will remain unchanged however.

VAT Threshold

Has risen to £73,000 from £70,000 while the de registration threshold will increase to £71,000 (from £68,000)

Research & Development expenditure

Currently the rate of R&D tax credit is 75% of the total amount spent which means business can obtain tax relief for 175% of the amount qualifying for R&D expenditure.  From April 2011, this has increased to 100% so that businesses will be able to obtain tax relief for 200% of the cost of the R&D expenditure.

Posted by Chris Mollan