Helping business means a further reduction in the rate of corporation tax to 30% with a small companies’ rate of 20%, although not for a further 12 months.
A continuation of first-year allowances on plant and machinery for a further year, although at a slightly reduced rate of 40% is a bonus for some.
Textile renters planning a refurbishment in late 1999 or 2000 should consider bringing that decision forward to June 1999 or earlier.
Bad news for business is the change in national insurance. Abolishing national insurance contributions for the first £81 of earnings may bring more people back into lower paid employment—although it is not wholly clear where these jobs are to come from. An increase in the rate of employer’s national insurance after that level by over 20% to 12.2% will be a significant extra cost for some.
Transport costs will be hit by the decision to raise road fuel duties by at least 6%/year above inflation. This year, that means adding 4.4p/litre on petrol (4.9p on leaded) and 5.5p/litre on diesel.
This will be mitigated to some extent by the proposal to reduce vehicle excise duty on lorries and private cars meeting low emissions standards, but will not apply until 1 January 1999. Suppliers could be forgiven for wanting to pass on the extra cost of deliveries.
The VAT registration threshold goes up again to £50 000 from 1 April.
The bad news for entrepreneurs is the changes in capital gains tax. The new taper relief reduces the taxable gain after ten years by 75% for an interest in a business (including 5%-plus holdings in family-owned companies) and 40% for other assets.
For small businesses there is a heavy price to pay, namely the phasing out of retirement relief from 5 April 1999.
