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December 05, 2012

Chancellor tweaks taxes but sticks to plan A as austerity is extended

There was some good news for businesses in George Osborne's Autumn Statement — against a backdrop of gloomy forecasts.

The headline announcements for businesses were:

  • Small business rate relief to be extended for another year from April 2013
  • Annual Investment Allowance to increase ten-fold from £25,000 to £250,000 for two years from Jan 2013
  • New empty property relief for new builds completed between 1 October 2013 and 30 Sept 2016
  • Corporation tax (for companies with profits of more than £300k) to be reduced by 1% from April 2014 (to 21%)
  • The planned 3p fuel duty increase is to be scrapped
  • Pension lifetime allowance to be reduced from 2014-15 to £1.25m and annual allowance to £40,000 from £50,000
  • Personal allowance increasing from April 2013 to £9,440.

Austerity measures have been extended to 2018 as Osborne admitted that he would be missing his own target for reducing the national debt. And he said the UK economy is now expected to shrink by a worse than expected 0.1% this year.

Despite the gloom, Osborne said Britain was "on the right track and turning back now would be a disaster". The OBR (Office for Budget Responsibility) has predicted growth of 1.2% next year and 2% in 2014.

In addition, new investment announcements in the Autumn Statement have been outlined by the Department for Business Innovation & Skills (BIS):

  • An additional £600 million for science, research and innovation;
  • £1 billion confirmed for the business bank (previously announced);
  • The Regional Growth Fund will receive an additional £350 million;
  • Increased funding of £140 million for UK Trade & Investment (UKTI) to help small and medium-sized business export abroad;
  • £1.5 billion to help small companies to access growing markets overseas. For the first time, UK Export Finance will be able to issue loans to overseas customers and buyers wanting to purchase goods from UK businesses.

The Autumn Statement was broadly welcomed by John Walker, national chairman of the Federation of Small Businesses (FSB): "We welcome today's statement and we are encouraged by the Chancellors' acknowledgement that small businesses need more help. We accept that bold actions are needed to boost the economy and we hope we are on the right road to helping small firms. The Chancellor has listened to many of our members' concerns, and has put forward proposals to address these issues - notably around capital allowances, more encouragement for investors to place funding in small businesses, and cancelling the 3p rise in fuel duty.  We now eagerly await further details on the small business bank which we have long seen playing a central role in opening up finance for small firms."