Budget blow for business owners – or is it?
The Chancellor has delivered a number of measures within today’s budget which are likely to inject a feeling of nervousness into the hearts of many small- to mid-sized business owners. This year’s budget was always penned to be a cautionary one, with Philip Hammond claiming that there was “no room for complacency” – despite unveiling forecasts for higher growth and lower borrowing.
However, the announcement that the tax-free dividend allowance would be reduced from £5,000 to £2,000 is not likely to be popular amongst company directors.
Although the move is designed to net the Government an extra £1bn in revenues by tackling those who deliberately set up companies in order to reduce tax payments, it will still hit the many small businesses hard who choose make payments to directors through dividend payments. The Chancellor points out that the measure will affect around 2.3m individuals in 2018-19 who will lose, on average, £315 a year. For family-owned businesses the cumulative value could be quite significant.
The Chancellor has argued that many directors will be able to counter any loss through increased ISA allowances (set to increase to £20,000 from the next financial year from its current £15,240) as well as a rise in the personal allowance to £11,500 from April.
We would encourage business owners to take advice on their financial affairs, and how directors are remunerated. It is vital that directors ensure they are making the most of personal tax relief (such as the new ISA allowance) but also ensuring they make use of some of the additional measures announced. These include the £300m “discretionary fund” to help the businesses which have been hardest hit by rate rises or the new apprentice levy which comes into effect this April. Science and technology businesses were also given a £500m boost in the budget, and those which specialise in robotics and AI were specifically targeted for an additional financial boost.
While the budget may have done little to quench fears of uncertainty, here at BCMS we are seeing an increase in businesses (particularly overseas organisations) who are looking to acquire companies within the UK. In the four months post-referendum, we saw a 54% increase in the number of offers received for businesses compared to the same period in the previous year.
This increased buyer interest, coupled with the Chancellor’s new measures hitting the small business community the hardest, leads us to believe that the current climate is one of the most favourable periods we have seen in recent years to consider a business sale.