Osborne's not so great escape
Jun 22 2010
“Austerity Budget announced”
The rate of VAT will go up from 17.5 per cent to 20 per cent in January, George Osborne announced in his emergency Budget.
This comes as the chancellor introduced a raft of tax changes in a bid to plug the country’s £155 billion deficit.
Gary Davies, financial director of electronics recycling company ShP, says: ‘The VAT increase was something everyone expected, although it won’t affect profitability it will impinge on cash flow, something that’s already very tight. An extra 2.5 per cent will make it even tighter.’
Other changes include an increase in capital gains tax from 18 per cent to 28 per cent, which will come into force from midnight.
However, the chancellor committed to reducing corporation tax to small businesses to 20 per cent, a 1 per cent reduction. Start-ups based outside London and the East and South East will also be exempt from paying the first £5,000 in national insurance contributions for the first ten employees.
Victoria Pooley, managing director of The Data Partnership, says: ‘I always thought the idea of offering tax breaks on the NI contributions an employer pays was a great idea. Taxing businesses for employing staff, which thereby boosts the economy and reduces the unemployment rate was always a nonsensical tax in my mind.’
Pooley adds that the rise in GGT is a disappointment. ‘I really feel that this tax will discourage entrepreneurs and business earners from taking the personal risks on board, which bring economic strength to the country, when they will only be remunerated up to half of what they earned.’
Click here to read the full Budget.