It is arguably the most business-friendly Budget in years but under the polish and spin, what does the latest Budget mean for the majority of UK businesses that class themselves as an SME?

Business Rate Relief

One of the most welcomed policies of the 2016 Budget was the announcement that, from April 2017, 600,000 small businesses will no longer have to pay business rates, and a further ¼ million will benefit from reductions.

This is due to the value of a property that qualifies a small business for rate relief being doubled from £6,000 to £12,000, with rates being tapered for those whose business premises are valued up to £15,000.

Business rates are debatably one of the most hated taxes for small business owners, so this reform will be welcomed with open arms.

Looking to the future, there were also promises that business rates will be raised in line with the Consumer Price Index (CPI) instead of the Retail Price Index (RPI), a move that had been called for by business groups previously.

However, it should be noted that many small businesses do not actually own the property they frequent, which means that it is not as wide-ranging as first thought. It will be interesting to see if landlords transfer any savings they make to their tenants.

Most pubs are run by tenants not landlords

The ‘Devolution Revolution’

The devolution plans were once again a topic of note. The Northern Powerhouse received less airtime than usual, with Osborne choosing to focus on the UK-wide plans for local power increases.

The ability for local authorities to set business rates was confirmed once again, and while this may be good news for some localities, it may not be such good news for those business owners who have set up in an area with a less dynamic business population.

Our research has shown that the cost of running a business varies wildly from city to city as it is and giving authority to local governments to control taxes like business rates will only make the difference greater.

This is not to say that a shifted focus away from centralisation is a bad thing. Investment into the Midlands Engine and the Northern Powerhouse is still on the agenda with transport project ‘go-aheads’ being given the green light.

HS3 will undoubtedly aid the Northern economy, linking Manchester and Leeds and the £80 million Crossrail 2 project will definitely benefit our nation’s capital.

Tax Changes

Great news for businesses of all shapes and sizes, the reduction in Corporation Tax to 17%, by April 2020, was an unpredicted bonus for many. Currently at 20%, UK Corporation Tax is already the lowest in the G20 with the further decrease expected to benefit over 1 million UK businesses.

The reduction will benefit small businesses and start-ups who will now be able to re-invest more of their profit into expansion and new jobs, stimulating the economy and driving up GDP. That’s the theory.

In practice, it will be interesting to see if these cuts do actually encourage re-investment or if saved costs will be spent elsewhere.

Another unexpected tax reform was that of Capital Gains Tax, which will be cut from 28% to 20% and from 18% to 10% for basic rates. Admittedly, this is unlikely to massively affect small businesses but it may encourage investment, which is never a bad thing.

Tax changes might encourage the odd new investment

For the self-employed there was further good news with Osborne announcing that Class 2 National Insurance contributions (NICs) are to be scrapped. This means that, from April 2018, the self-employed will only have to pay Class 4 NICs, which will also be reformed to include the State Pension entitlement currently enjoyed only by Class 2 contributors.

Finally, Osborne promised a clamp-down on larger companies using excessive interest payments to avoid profit taxes. It is estimated that, in 5 years, £8 billion will be pumped back into the economy as a result of this, paying for the policies that are set to benefit the UK’s small business community.

All in all, it was a good day for SMEs with lots of changes set to benefit businesses all over the UK. As we continue on our crusade to reduce business energy bills, it is refreshing to see that the Government is now also keen to nurture enterprise, it will just be interesting to see if the policies are sustainable long-term.

Phil Foster is fonder of Love Energy Savings.