If you were watching George Osborne deliver his budget in the hope of hearing some important announcements about the future of small business, you were probably and quite understandably left scratching your head.
Not because there was an abnormal lack of reference to the small business community, but because it was practically impossible to make out a single word he was saying. The broadcast became an uproarious soundscape of merciless jeers, guffaws of support, and general antics more suited to a school bus than to the highest seats of power in the land.
But I digress; having all but abandoned the live coverage of the budget, I set about looking at the transcript of the speech, to unpick some of the finer details and in particular how they will impact on the startup and small business community.
Overall the chancellor was very measured in his approach (there is after all an election just around the corner) and he was sure to repeatedly emphasise government recognition of the importance of the self-employed workforce to the UK’s economy.
Even so there were only a couple of announcements that are likely to have any real and/or lasting effect on the average small business.
SCRAPPING OF SELF-ASSESSMENT
This is the announcement that has prompted most discussion and speculation amongst the business community, since it came as a relative bolt from the blue, and is such a significant fundamental change to the way in which the business tax system operates. I don't mind admitting I was rather taken aback myself.
Initial jubilation at the death of such a laborious and painstaking annual misery, soon gave way to rational thought, and hundreds of questions that the chancellor has left unanswered.
He has promised that in the future (by 2020 in fact) all of the process will be carried out through an online portal which will require minimum input, and automatically complete the vast majority of the information.
This is all fine and dandy, but nowhere in the Budget report, or indeed the white paper Making Tax Easier, does he mention how this will happen. Anyone who has ever completed a self assessment tax return will, I’m sure, share in my scepticism; it feels almost impossible that the situation outlined by the chancellor will ever be achieved, let alone within the next 5 years.
The level of information required by HMRC is just too vast and varied to make such a joined up approach feasible. But then again, I may be eating my words in five years time, if the UK has one of the world’s most advanced and simple tax systems...
Leaving my cynicism at the door for a moment, and assuming that these reforms do operate as promised, the benefits to the average self-employed person could be pretty substantial, as one of the most complicated and frustrating of business administration tasks, all but disappears from to-do lists the country over.
CLASS 2 NATIONAL INSURANCE CONTRIBUTIONS
On the matter of national insurance contributions (NIC) for the self employed, the chancellor made one long awaited and mercifully common-sense announcement; the complete scrapping of the class 2 version of this charge.
At present if you are self-employed you are often required to pay 2 levels of NIC simultaneously, class 2 and class 4. Class 2 national insurance is the basic rate of contributions made by a self-employed person who’s profits exceed £5,885 per annum. This is distinct from the higher rate, Class 4, which is a contribution paid on profits exceeding £7,956 a year… it’s all rather confusing.
Class 2 NIC will be abolished completely and a more simplistic system based on the class 4 rate will be introduced. As was the case with the self-assessment reforms, the details on how this will work are rather sketchy at the moment, but we trust it should be a significantly less complicated system that that the one that exists at the moment.
PERSONAL TAX FREE ALLOWANCE
Rises in the Personal Tax Free Allowance have become something of a trademark of this government, and this latest increase of £200 to £10,800, whilst not earth-shattering, will be welcomed by the employed and self-employed alike. The allowance will continue to increase to £11,000 by 2017-18 which will leave the figure at over double what it was in 2007.
MORE AND BETTER ADVICE FOR SMEs
This was indeed welcome news for the majority of startups and SMEs, as George Osborne announced that they are to be given more robust access to information on key business needs such as legal services.
This will be delivered through both Citizen’s Advice and the Great Business websites.
Alongside this, was the confirmation of £4 million investment into the current Skills Investment Fund, which provides funding for training in a number of creative industries including film, television, visual effects, video games and animation.
You would have to scrape the bottom of the barrel pretty hard to get much else out of this budget directly and specifically relevant to the start-up and small business communities.
As I write this I am reminded of my comments on last year's budget, which are equally fitting this time round “Something for everyone, not much though. Fingers crossed for next year”.
Eoin O'Hara is a business developer and lead content writer at Startacus.net. He has a background combining arts and culture with strategic business development, and now plays a central role in the growth of the Startacus brand. Startacus.net, The Self Start Society, is the place for enterprising people to learn, share, connect and bring ideas to life. Follow them at @Iamstartacus