George Osborne delivered his autumn 2011 statement against a continual backdrop of negative economic news with many doom and gloom merchants forecasting that the UK along with other European countries will suffer a double dip recession.
Consequently the challenge for the Chancellor was to find a way of stimulating growth and boost the economy without undermining the confidence being shown by the financial markets and credit agencies towards the UK.
Our thoughts and the response from others we have spoken to is that perhaps it was an unsurprising and disappointed speech and nothing very ambitious to helping small business owners.
For example it is great to see that the main rate of corporation tax is being reduced but this generally only benefits a business making profits of more than £300,000 per year.
However, the introduction of a new Seed Enterprise Investment Scheme (SEIS) from April 2012, which will offer from April 2012 50% income tax relief on investments and offer Capital Gains Tax exemption on gains realised in the tax year 2012/2013 and reinvested in the SEIS in the same tax year seems to be a great initiative.
The main announcements coming out of the autumn 2011 statement we thought are:
Economic and Spending Announcements
- The Chancellor announced that the OBR now expects UK GDP to grow by 0.9% this year (2011) and 0.7% next year, which is significantly lower than the 1.7% for 2011 and 2.5% for 2012 predicted in March’s Budget.
- Growth UK GDP for 2012, 2014 and 2015 is predicted to be 2.1%, 2.7% and 3% respectively.
- Public borrowing will be £127bn this year but decreasing to £53bn in 2015/2016. Although this reduction is not as fast and significant and previously forecast.
- The debt to GDP ratio is to peak at 78% in 2014-5.
- Public sector pay will go up by an average of just 1% for the two years after the current two year pay freeze is over.
- There are to be further public sector spending cuts, which will be used to directly invest in a number of capital infrastructure projects.
- 100% capital allowances to be introduced for certain areas of the country but again the South and South West seems to have been ignored.
- It was confirmed that the main rate of Corporation Tax will be reduced to 25% from April 2012.
- The Capital Gains Tax allowance is to be frozen at £10,100.
- A new tax relief scheme (SEIS) is to be introduced for individuals who invest in start-up businesses.
- Planned fuel duty increase planned in January is cancelled and the planned increase in August next year is reduced to 3p per litre.
- The business rate tax relief holiday for small businesses will be extended until April 2013.
Other Announcements and Measures to be Introduced
- State pension age to be increased to 67 from 2026.
- A new National Loan Guarantee scheme to be introduced for businesses with a turnover of less than £50m, which it is hoped will result in a 1% reduction in interest rates charged to qualifying businesses.
- Two further Enterprise Zones to be created both in the North of England.
- A new mortgage indemnity scheme to be introduced, which will aim to help up to 100,000 people buy homes with 5% deposit. In addition the Right to Buy initiative is to be re-launched providing up to a 50% discount for tenants to buy their own homes. However the current Stamp Duty holiday for first time buyers looks like it is to be abolished.
Hope you have found this summary useful and if you want to find out more about these announcements then please do not hesitate to call us.