We expected this Budget to be George Osborne’s job application to become the next Prime Minister if the UK votes to stay in the European Union. Few predicted that he was after every other cabinet role too.
Like a magpie, Mr Osborne stole the richest silver from his colleagues: a sprinkling of sugar from the health minister, new academies from the education minister and a devolution revolution for Greater Lincolnshire, East Anglia and the West of England from his local communities comrade.
But Mr Osborne nicked his best Budget tax-cutting idea from Napoleon Bonaparte – after all, it was supposedly the French leader who immortalised us as a nation of shopkeepers. By doubling the business rate relief threshold to £15,000 a year, about 600,000 shopkeepers and small business owners will be liberated from paying any business rates from next year.
And, by basing rates on CPI rather than RPI, retailers will be able to work with more accurate bills, helpful in long-term planning. The tax-relief threshold is going up for those with rateable values up to £51,000, a move that should help thousands more small businesses. There will also be help with buying property too, as the commercial stamp duty rate on purchases up to £150,000 is now zero, then 2 per cent on the next £100,000 and 5 per cent top rate above £250,000.
No doubt the Chancellor will be praying that the mythical hairdressers of Leeds, newsagents of Nuneaton and corner-shop owners of Barnstaple, whom he name-checked in his speech, as representing the saviours of the high street will be out singing his praises.
Mr Osborne will also be hoping they will vote for In when the referendum comes in June. As with most of his manoeuvres, the decision to slash rates for shopkeepers makes great commercial sense. But even better politics: for the polls show that entrepreneurs and small-to-medium enterprise owners are far more likely to vote Out of the EU than big-business leaders.
Other moves designed to help David versus Goliath include the decision to abolish Class 2 national insurance contributions for the self-employed, freezing fuel duty – a big cost for small businesses – and support for online retailers by clamping down on VAT avoidance by overseas firms to create a level playing field.
There was help, too, from HM Revenue & Customs to create a seven-day service, as well as dedicated lines for small business and the self-employed.
By far the biggest boost for start-ups and SMEs was the extension of entrepreneur’s relief to external investors who hold newly issued shares in unlisted companies from this month. Investors are allowed 10 per cent relief on investments up to £10m so long as the shares are held for three years. Until now, though, only shareholders who were employed in companies, either as directors or employees, were eligible for this relief.
Genevieve Moore, tax partner at Blick Rothenberg, said this was a great move as many investors and entrepreneurs had feared the relief would be dropped and will be a huge boost to confidence, as well as future fund-raising and jobs growth.
Cuts to capital gains tax on investments – but not residential property – was another welcome move and a sign of a shift away from property to capital and equity investments. CGT will be cut from 28 per cent to 20 per cent on investments other than buy-to-let properties.
One sting in the tail for small business directors was the tax rise on what’s called “loans to participators”, from 25 per cent to 32.5 per cent. It was an attempt to clamp down on company directors taking out money through loans rather than dividends, and follows the recent decision to hike dividend taxes.
Overall, the small business community was cock-a-hoop at being so courted. Funny what a referendum does to concentrate the mind. Mike Cherry of the Federation of Small Businesses says members were delighted by the rates relief and now wanted the Government to go even further and change the Small Business Rates Relief scheme to a property-based allowance.
Mr Cherry reckons the combination of new devolution deals (although Cambridge is already threatening to pull out of the East Anglia new mayoralty) with increased investment in roads, rails and flood defences will push up productivity and confidence among small-business owners.
On that note, the further cut in corporation tax, down to 17 per cent by 2020, almost passed by without notice, so used we have become to cuts. Yet the corporation-tax rate has come down now from 33 per cent over the past 16 years – an astonishing feat. No wonder 2,300 new businesses set up here last year as the UK now has the lowest rate of G20 countries and less than half the rate of the US.
Yet for all Mr Osborne’s headline-grabbing business tax cuts, he’s at heart a tax fiddler. As Ms Moore says, personal tax rates for those on £60,000 upwards – and particularly those earning £100,000-plus – are far higher at an effective tax rate of around 60 per cent than they were under Labour. Moreover, tax rates are now so complicated that most people – even the well-off who can afford to have advisers – don’t understand them. That’s from a tax partner, and she’s right. And it’s not good for growth.