Company owners and financiers have weighed in on the Chancellor's announcement, with views ranging from a 'missed opportunity' to 'an excellent outcome for entrepreneurs'.
Ed Molyneux, CEO of FreeAgent says that, on first look, there seems to be some good news for small business owners in this year’s Budget, with NIC2s to be scrapped, business rate relief doubled, cuts made to Capital Gains Tax and corporate stamp duty and the government is going to create two new £1,000 allowances for property and trading income, all of which are positive announcements.
But he adds that the Budget is 'also a bit of a missed opportunity when it comes to small business tax reform'.
'There’s very little information about how the government actually plans to make tax simpler for self-employed people, or if it plans to follow through on any ideas put forth by the Office of Tax Simplification other than a closer alignment of income tax and NI contributions,' Molyneux says.
There’s also little for contractors to get excited about either, he adds. 'There are no amendments to the forthcoming travel and subsistence tax relief changes which is a huge blow because, in their current form, the changes will unfairly penalise contractors and could potentially put their businesses at risk. I would personally have liked to see an alternative approach such as allowing travel and subsistence claims for any home to work journeys longer than the national average.'
Government has shown that it has no intention of dealing with the issue of IR35, in Molyneux's view. 'Despite its intended goal of highlighting false self-employment and tackling tax avoidance, IR35 actually has a real, detrimental effect on small 1-2 person businesses and IT contractors who run their business as a limited companies and take short-term contracts.
'I remain hopeful that it will eventually be replaced with simpler, more robust and fairer rules around small businesses’ employment status.'
Joe Stelzer, managing partner at Cavendish Corporate Finance is more upbeat, saying that yesterday’s budget represents an excellent outcome for entrepreneurs and investors in private companies.
'Not only was entrepreneurs relief left intact (when some had feared a cut) but the reduction in the higher rate of CGT from 28 per cent to 20 per cent will assist entrepreneurs with gains in excess of the £10 million entrepreneur’s relief allowance.
The Budget also provides considerable encouragement to invest in new business ventures through the new 10 per cent rate on long-term investment in unlisted companies, Stelzer adds.
'The relief is subject to a £10 million lifetime allowance and a minimum three-year hold period, but will be particularly significant for entrepreneurs looking to attract investment in enterprises which don’t qualify for EIS/SEIS relief. The advantageous changes in CGT rates make this an ideal time for business owners to be considering a sale.'
John Midgley of Intuit Quickbooks says that one of the biggest challenges to self-employed workers is the lack of infrastructure to support them, so it’s pleasing for him to see £71 million put towards improving the service HMRC provides taxpayers, including more online support and reduced waiting times.
'This investment comes ahead of more significant changes to the way that businesses interact with the Revenue, which will come into force from April 2018, to fully digitise the UK tax system.'
Midgley adds that many of the company's customers will be among the 600,000 who will pay no business rates from April 2017 when rate relief is increased to £15,000.
'This has been a long standing concern for many businesses and important given the additional costs small business owners will face this year due to auto-enrolment legislation and the implementation of the National Living Wage.
'Finally labelled as a 'tax break for the digital age', significant new tax allowances will be available to those who sell services online or rent out their homes.
'Business owners and accountants will be digging into the details of these changes to understand what they mean on an individual level. It will be what comes out of those discussions that will ultimately determine the knock-on effect to UK productivity figures and the millions of workers small businesses employ throughout the country.'
Further reading on the Budget
See also: Small business owners have no regrets