Budget 2014: What It Means For Small Businesses

Last post: Mar 27, 2014

The latest budget from Chancellor Osborne had some interesting changes for SMEs. Here we review some of the key points.

What the budget means for small business

The 2014 budget was billed as one that would reward savers and businesses and so it proved to be. Although there were few giveaways there were some eye-catching ideas meant to get Britain working again.

1) Banking on business

For the first time in a long time George Osborne had a background of positive news to play with. This time last year the landscape looked bleak – there was little or no growth and his pledge to eliminate the deficit before the next election appeared laughable.

This year, the deficit target is still being missed but there has finally been good news on growth. In the autumn statement, the Office of Budget Responsibility projected growth of 2.4%. This time around he was able to up that to 2.7%. The IMF agrees and it currently believes the UK will grow faster than any other major European economy in 2014.

Even so, this recovery is as fragile as a China doll, as he admitted. Growth this year has been fuelled by property investment which is part of the reason few people on the ground are seeing the effects. To create a more wide ranging and sustainable recovery, he needs a balanced economy, and for that he needs to help businesses invest and export.

2) Investment allowance

The allowance for how much businesses can invest without paying tax has shot up to £500,000. This means that any purchases or investments designed to help your business grow can be claimed back on tax. In other words, as he said, the vast majority of small business expenditure will be tax free.

Hidden amongst some of the main announcements was something of interest to the world of alternative finance. By introducing social investment tax relief at 30% he created a strong financial incentive for people to invest in social enterprises. These are companies that try to make a profit and help society at the same time and this makes it possible to invest in them and get tax benefits in the same way as you might get from charitable donations.

3) Export finance

His other priority was to address the continuing issue of Britain's trade deficit. It currently stands at 5% of GDP which is comfortably the worst of the G7 nations. By doubling the level of export finance available to £3bn, and reducing the interest rates at which it lends, he hopes to make it easier for small and medium sized business to compete in overseas markets.

For smaller companies this will help to bridge the gap that exists between delivery and payment and simultaneously will allow them.

What this means is there is more finance available to help companies bridge that difficult period between delivery and payment allowing them to offer better payment terms to overseas customers.

Other changes included support for new global routes into regional airports and also a reduction in air passenger duty for all destinations to the cheapest level.

4) Energy

As expected there was also some relief for energy costs thanks to a grand £7bn package to reduce bills. The Carbon Price Floor which charges polluters for the fossil fuels they burn has been frozen and for some energy intensive firms it has been suspended altogether prompting howls of rage from the environmental lobby.

So the message to small business was clear. He wants to make life easier for small scale startups and break down some of the key barriers that prevent small firms trying to expand. As to whether it will work, we may know a little more next year.