How will the Conservative/Lib-Dem coalition impact on business?
May 2010 has been a momentous month in British politics with the Conservatives and Liberal Democrats forming the first peacetime coalition government in this country since 1922.
However, with the budget deficit the stated priority of the new government, how will this new administration impact on you and your business?
The new government has said that it wishes to address the deficit mainly by using spending cuts rather than tax increases but it is widely anticipated that VAT will have to rise by 2.5% to 20%, which is certain to have an impact on some businesses.
Capital Gains tax is also expected to rise, bringing it into line with income tax, meaning a top rate of CGT of at least 40%, which is likely to have a an impact on business owners who pays themselves through dividends.
The new administration will, however, scrap Labour’s proposed 1% in employers’ National Insurance Contributions (the so-called “jobs tax”) and personal income tax allowances will also be increased in April 2011 and will continue to increase over time so that, ultimately, the first £10,000 earned will be tax free, theoretically putting more money in the pockets of business owners.
The position on corporation tax is currently unknown, although Conservative manifesto did promise to cut the headline rate to 25% and the small companies rate to 20%.
We therefore await the new government’s 50 day budget with interest.
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