Certain announcements were put forward by the Chancellor in the 2009 Budget today which affect business. The Chancellor firstly stated that he expects to see economic growth returning by the end of 2009 and predicts growth of 1.25% and 3.5% in 2010 and 2011 respectively. Public borrowing is set to increase to £175bn in 2009 and decrease in subsequent years. Although inflation is expected to fall to around 1% by the end of 2009, the Retail Price Index may fall to -3% before moving back to zero in 2010.

Taxes
• Individuals with incomes over £150,000 per year will be taxed at 50% from April 2010, with a 42.5% rate for dividend income
• From the 2010-11 tax year, the basic personal allowance for income tax will be gradually reduced to nil for individuals with “adjusted net incomes” above £100,000
• From 2010-11 there will be increases to the trust rate and dividend trust rate to match those for income tax
• The measure includes new powers to vary the income tax rates for the charges that apply to registered pension schemes.

These changes replace the announcements made at the 2008 Pre-Budget Report. The reduction of personal allowances affects those with incomes over £100,000 and the new tax rate affects those with incomes over £150,000.

General Business Measures
• The standard rate of VAT will remain at 15% until December 2009, and return to 17.5% from 1st January 2010
• The VAT registration threshold will rise to £68,000 from 1st May 2009
• Enhanced loss relief announced in the 2008 Pre-Budget Report will be extended for an additional year
• HMRC’s Business Payment Support Service to be expanded for those businesses which are genuinely unable to pay their outstanding liability immediately or enter into a reasonable time to pay arrangement.
• Confirmation that businesses can spread payment of this year’s inflation up-rating to business rates over three years, as announced on 31 March 2009
• A ‘top-up’ trade credit insurance scheme to help businesses maintain their finances, in which Government will offer to match private sector trade credit insurance provision, for a temporary period, if insurers reduce cover to any UK business
• For a temporary period, a vehicle scrappage scheme, co-funded with industry, that will enable consumers who scrap vehicles older than ten years to replace them with a brand new vehicle at a discount of £2,000.
• A temporary increase in capital allowances to 40 per cent for one year, with effect from April 2009, to allow a higher proportion of private investment to be offset in that year against taxable profits
• A £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance, of which a third of the funding will be earmarked for low carbon projects
• Implementation of a package of reforms to the taxation of foreign profits, including the introduction of an exemption for foreign dividends, supported by limited restrictions to the interest deduction rules.

Figures released by Barclays which show the number of new businesses reveal that the start-up market remains robust, despite the economic recession. The number of new businesses rose from 432,300 in 2007 to 436,600 in 2008 and the total number of businesses increased by 1 per cent to just under 2.9 million firms.

There could be a number of reasons for the rise, including individuals made redundant opting for self-employment. In terms of percentage growth women outperformed in comparison to the national average and overtook men. Female-only starts ups increased by 9 per cent to more than 90,000 in 2008 compared to 83,000 in 2007. Male-only start-ups showed a slight increase of less than 1 per cent, to 300,000.

At a regional level there were contrasting fortunes, start-up activity increased by 8 per cent in Yorkshire and 6 per cent in the East Midlands. However, the number of businesses started up declined by 6 per cent in Wales and 3 per cent in the South West.

There is some indication of the development of the economy over the past year in the business sector pattern of start-ups in 2008. New property service firms fell by 13 per cent and there was an 8 per cent decline in businesses associated with construction. In contrast, start-up activity in the area of health, education and social work increased by more than 13 per cent.