2010 Budget Commentary

Image of 2010 Budget Commentary

April 4, 2010

With the final budget now delivered before the general election, we look at the £2.5billion package outlined for small businesses and what this means for the small business owner.

Fuel Costs

With an expected increase over the year of 3p a litre on fuel, this will hit most businesses including those that claim the 40p mileage. The gap between the 40p per mile and the actual cost of running motor vehicles will be further reduced and with no increase. The 40p rate per mile on the first 10,000 miles of business travel has been in place since the 2002/03 tax year and has not changed since implementation.

Business Rates

It has been said that business rates will be cut from October 2010 and 345,000 businesses are set to benefit from either a reduction and or relief from business rates. This is welcome news since the deferment of increases in business rates offered last year is menial at best. We await further detail on this.

Annual Investment Allowance

While in principle an increase in the AIA from £50,000 & £100,000 sounds impressive its will mean very little for the majority of small businesses. The current £50,000 AIA limit is sufficient for investments in plants in any one year. It remains welcome news for those who are looking to make significant investments beyond £50,000 in any one year.

Capital Gains Tax

The entrepreneurs’ lifetime relief of £1 million has been increased to £2million. We hope that this is not reduced when the economy (hopefully) starts to improve. The capital gains rate of 18% remains unchanged.

Funding For Small And Medium Businesses

Alistar Darling promised a £2.5billion growth package to help small businesses to “promote innovation, invest in national infrastructure and key skills.”

Lloyds & RBS will be given a lending target of £94bn for small and medium-sized businesses. We all know the government’s desire to borrow its way out of trouble and its budget deficit is evidence of this. Borrowing and gearing up your business does make financial sense and cheaper and more accessible funding is always good news in the hands of businesses that are viable. However, cheaper finance and easy loans in the property market is what caused the current financial crisis. Simply handing out money for banks to suffer irrecoverable debts in the future can only be trouble and cause a double-dip recession.

Ultimately there is no substitute for creating and sustaining a healthy economy where business owners can help themselves. As expected the budget failed to deliver on this and as expected this was a budget for political purposes and the ‘real’ budget will be delivered in the next pre-budget report.

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