SME Budget bonanza: entrepreneurs react

WITH David Cameron urging the British public to be more entrepreneurial in a speech today, many are asking whether the government is doing enough to support start-ups and small businesses. Last week’s Budget was dubbed the “Budget for growth” and offered a number of measured aimed at entrepreneurs and small businesses, but not everyone is convinced they will have an impact. Mark Littlewood, the director general of the Institute of Economic Affairs (IEA), for example, is not convinced: “As a budget that was intended to be about encouraging growth, this is a disappointment. Even on the areas where the Chancellor is doing the right things, his reforms are tiny. He committed himself to simplifying tax rules, but has only eliminated 100 pages from our 10,000 page tax rulebook and has added many more.”

Others were more positive. Miles Templeman, the director general of the Institute of Directors said: “This was a Budget aimed at changing perceptions and boosting business confidence about long-term economic prospects in the UK. The Chancellor didn’t have much money to play with but he played his hand well”. City A.M. asked some entrepreneurs what they thought.

• Osborne announced the lifetime limit for entrepreneur’s relief will double from £5m to £10m.

• The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will be reformed, if the EU grants approval.

• 21 enterprise zones will be rolled out across the UK.

• Start-ups to be exempt from new domestic regulation for three years.

• The small business rate relief holiday will run for another year from 1 October.

• A consultation on merging national insurance and income tax.

• If approved by the EU, research and development tax will increase to 200 per cent for small and medium-sized business.

• Further deregulation promised.

The Budget has put venture capital trusts (VCT) and the enterprise investment scheme (EIS) back where they belong and that’s at the heart of enabling private investors to get behind British innovation and allow more companies – not just start-ups – to benefit from tax-efficient investment. Pre-Budget fears that the Chancellor would turn his back on VCTs and EIS have proved unfounded. EIS investments will become really attractive to investors as a result of the Chancellor’s changes.

The introduction of 21 Enterprise Zones provides an opportunity for encouraging start ups. The financial discounts on business rates, extra capital allowances for manufacturing and super-fast broadband will generate hubs of excellence where small businesses can work together and contribute to developing successful businesses. But this kind of support is important for all new and small businesses, and it is important that they are not neglected. We need to encourage and support businesses across the country, whatever their location.

It is about time that income tax and national insurance (NI) were merged. I hope the consultation is short. It wasn’t so long ago that I used to do the payroll myself. The different thresholds at which NI and income tax kick in made it hard to tell people what a pay increase would mean in their pocket. The consultation is not really needed: the current categories are a mess and we all know the money goes to the same place in the end.