Certain announcements were put forward by the Chancellor in the 2009 Budget today which affect business.  The Chancellor firstly stated that he expects to see economic growth returning by the end of 2009 and predicts growth of 1.25% and 3.5% in 2010 and 2011 respectively.  Public borrowing is set to increase to £175bn in 2009 and decrease in subsequent years.  Although inflation is expected to fall to around 1% by the end of 2009, the Retail Price Index may fall to -3% before moving back to zero in 2010.    

Taxes 

• Individuals with incomes over £150,000 per year will be taxed at 50% from April 2010, with a 42.5% rate for dividend income
• From the 2010-11 tax year, the basic personal allowance for income tax will be gradually reduced to nil for individuals with “adjusted net incomes” above £100,000
• From 2010-11 there will be increases to the trust rate and dividend trust rate to match those for income tax·        
• The measures include new powers to vary the income tax rates for the charges that apply to registered pension schemes.  

These changes replace the announcements made at the 2008 Pre-Budget Report. The reduction of personal allowances affects those with incomes over £100,000 and the new tax rate affects those with incomes over £150,000. 

General Business Measures

• The standard rate of VAT will remain at 15% until December 2009, and return to 17.5% from 1st January 2010
• The VAT registration threshold will rise to £68,000 from 1st May 2009
• Enhanced loss relief announced in the 2008 Pre-Budget Report will be extended for an additional year        
• HMRC's Business Payment Support Service to be expanded for those businesses which are genuinely unable to pay their outstanding liability immediately or enter into a reasonable time to pay arrangement        
• Confirmation that businesses can spread payment of this year's inflation up-rating to business rates over three years, as announced on 31 March 2009        
• A 'top-up' trade credit insurance scheme to help businesses maintain their finances, in which Government will offer to match private sector trade credit insurance provision, for a temporary period, if insurers reduce cover to any UK business        
• For a temporary period, a vehicle scrappage scheme, co-funded with industry,  that will enable consumers who scrap vehicles older than ten years to replace them with a brand new vehicle at a discount of £2,000.         
• A temporary increase in capital allowances to 40 per cent for one year, with effect from April 2009, to allow a higher proportion of private investment to be offset in that year against taxable profits        
• A £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance, of which a third of the funding will be earmarked for low carbon projects
• Implementation of a package of reforms to the taxation of foreign profits, including the introduction of an exemption for foreign dividends, supported by limited restrictions to the interest deduction rules.

Figures released by Barclays which show the number of new businesses reveal that the start-up market remains robust, despite the economic recession.  The number of new businesses rose from 432,300 in 2007 to 436,600 in 2008 and the total number of businesses increased by 1 per cent to just under 2.9 million firms.

There could be a number of reasons for the rise, including individuals made redundant opting for self employment.  In terms of percentage growth women outperformed in comparison to the national average and overtook men.  Female-only starts ups increased by 9 per cent to more than 90,000 in 2008 compared to 83,000 in 2007.  Male-only start-ups showed a slight increase of less than 1 per cent, to 300,000.

At a regional level there were contrasting fortunes, start-up activity increased by 8 per cent in Yorkshire and 6 per cent in the East Midlands. However, the number of businesses started up declined by 6 per cent in Wales and 3 per cent in the South West.

There is some indication of the development of the economy over the past year in the business sector pattern of start-ups in 2008. New property service firms fell by 13 per cent and there was an 8 per cent decline in businesses associated with construction. In contrast, start-up activity in the area of health, education and social work increased by more than 13 per cent.

The Bank of England has cut interest rates to a new all-time low of 0.5% and said it was now boosting the money supply to help revive the economy.

Interest rates have now been reduced six times since October, and the latest half a percentage point cut from January's 1% had been expected.

The Bank said it would expand the amount of money in the system by £75bn in an attempt to boost bank lending. The idea is that if the amount of money in the system is boosted, commercial banks will find it easier to lend.

Quantitative easing is sometimes incorrectly referred to as printing money, but the Bank will not expand the supply of money by making new banknotes. Instead, it will buy assets - such as government securities (gilts) and corporate bonds. But as it will not borrow to fund the purchases, it is creating new money.

Royal Bank of Scotland is to lend an extra £3 billion to small and medium-sized enterprises during 2009.

RBS – the parent company of NatWest – will make £250 million loan funds available across each of the nine English regions, along with separate schemes in Northern Ireland, Scotland and Wales. 

The struggling bank, which is set to be 70% state-owned after accepting help from the Government’s two multi-billion pound bail-out packages, said the new funding was part of their commitment to increase lending to UK firms by £6 billion. 

As well as providing extra commercial debt finance, the fund will offer businesses a range of other options, including lower priced loans from a £250 million pot secured from the European Investment Bank and trading business loans that allow firms to postpone capital repayments.

New minimum wage levels have been introduced today:

• £5.73 per hour for workers aged 22 years and older
• A development rate of £4.77 per hour for workers aged 18-21 inclusive
• £3.53 per hour for all workers under the age of 18, who are no longer of compulsory school age

Approximately one million workers will benefit from the rise and two-thirds of the beneficiaries will be women, reinforcing the NMW's positive role in narrowing the gender pay gap.

The increase in the NMW will also save the taxpayer an extra £245 million in reduced payments of in-work benefits.

The 3.8 per cent increase in the NMW (from £5.52 to £5.73) will be the ninth increase since it was introduced in April 1998. Over the last nine and a half years, the NMW has increased by 59.2 per cent, compared to a 44.2 per cent growth in average earnings.

Annual increases in the NMW since April 1998 have not led to any significant job losses, despite predictions from some business lobbyists. In fact, the latest labour market statistics show that in the year up to June 2008, in which employment growth across the whole economy dropped to just 0.6 per cent (148,000 more jobs), the low paying job sectors - including retail, cleaning and agriculture - grew at twice the pace (1.2 per cent, 102,000 more jobs).

Following the Chancellor’s announcement, the basic Personal Allowance for the 2008-09 tax year is increasing by £600 from £5,435 to £6,035 and the basic rate limit is reducing from £36,000 to £34,800.
As a result, many employees will see their tax code change in September. The new tax codes must be applied on the first payday on or after 7 September 2008.

The widespread popularity of TV shows looking at the world of business and start-up companies is helping to motivate more people to form their own small business, according to a new report.

Dragon’s Den and the Apprentice have both proved to be consistent ratings hits for the past few years, resulting in a range of spin-off shows, but as well as being popular research from Natwest suggests they are giving many more people to courage to start their own company.

The poll found that the equivalent of 17 million Brits have an idea for their company, with 30 per cent serious about making a go of it.

Furthermore, a fifth of the young entrepreneurs who have gone into business in the last five years said their main motivation was watching a business reality TV show.

“Whilst it’s encouraging that TV programmes can inspire an army of armchair entrepreneurs into action, they only really scratch the surface of what it takes to run a successful business,” said Steve Pateman from Natwest.

“Although over half (52 per cent) aren’t confident they have the skills and financial know-how to get started straight away…these initial hurdles needn’t be a barrier to getting a good business idea off the ground,” he added.

A NEW £150m investment fund is to be set up to help small and medium sized businesses start up or relocated to “unfashionable areas” of Wales.

Aspiring businesses are being given the opportunity to grow a business in Wales with the help of funding from the European Investment Bank. The money is being made available to help businesses grow in 'unfashionable' areas such as the Valleys and other rural areas. The funding will be available throughout Wales and will help businesses who find it hard to raise the capital to grow.