The Budget 2016: what does it mean for startups?
It's time for 2016's Spring Budget, aka the time of year when George Osborne once more sets out his economic plan for the country. We'll be live-tweeting the announcements, as well as running a blog highlighting the key things that small businesses need to know. But what looks likely to be on the agenda this time? We asked Ian Mason, Head of Development at Virgin StartUp for his predictions on what we're likely to see tomorrow.
The Good News
- Startups are most likely to benefit from a proposed £2,000 allowance for those that sell goods online - so if you sell on Ebay, Etsy or similar, your first £2000 of earnings per year could well be tax-free in the near future.
- In addition, if you’re one of our many entrepreneurs that have started up whilst working, you’re likely to benefit from increases to both main tax thresholds. By the end of this parliament, the Treasury has committed to raising the threshold at which people start paying tax from £10,600 to £12,500 and also to raising the higher rate threshold to £50,000 from £42,385.
- There’s also talk of an early cut in corporation tax beyond the 18% scheduled for 2020.
- Thinking rather more long-term, there is likely to be circa £300m in capital spending promised for a series of key infrastructure projects that could greatly help businesses in both the North West/Yorkshire and London, with an exploratory fund set up to look into the HS3 high-speed rail line between Manchester and Leeds, the trans-Pennine tunnel and Crossrail 2.
The Bad News
- That’s where the good news ends though sadly, as both global economic instability and domestic uncertainty over the EU referendum will see growth forecasts revised down.
- This means that the Chancellor will need to find cuts worth 50p in every £100 spent by the Government.
- In addition, there will be numerous tax increases. The key increases for startups will be: an increase in the tax on insurance premiums and a fuel duty increase, something that is now more likely given the recent oil price dip. So if you’re running vehicles in your start-up, your costs are likely to go up.
- For those startups employing staff, there are likely to be cuts to national insurance relief on employer pension contributions; so you may find that you need to put more cash into staff pensions to make up for the withdrawal of government support – which will increase the cost of hiring.