Budget Highlights
Maximum 10% tax on sale of business assets owned 2 years
Simplified VAT calculation for smaller businesses
1% rise in NIC rates from April 2003
Corporation tax cut from April 2002 for smaller companies
Excise duties on all vehicles frozen
Brown sweetens NI pill with boost for business
It was no surprise that Gordon Brown increased national insurance contributions (NICs) in his sixth
Budget. But the Chancellor deflected criticism by stating that the Government has decided that
funding improvements to the National Health Service from taxes is the best way to provide for the
health of the nation.
NICs will rise by 1% for employers, employees and the self-employed with effect from April 2003.
Crucially, the ceiling on employee and self-employed contributions has been removed for this
1% charge.
Even if he is increasingly willing to dip into private incomes to fund public spending, the Chancellor
remains a big fan of business, stressing the importance of enterprise to the economy as a whole.
Small to medium-sized companies will benefit from a reduction in corporation tax from 20% to 19%.
Those reporting profits below £10,000 will be exempt.
Mr Brown says the UK now has 'the most favourable corporation tax regime for small companies in
any of the advanced industrial countries,' although his critics claim that any benefits will be eroded
by the increases in employer's NICs.
A streamlining of the VAT regime was announced, along with an incentive to spur on the
development and use of 'green' technologies, including a 100% capital allowance for relevant
investment.
Changes have been made to the capital gains tax regime. The rate will be cut to 20% for business
assets held for a year or more and to 10% for assets held for more than two years. Exemptions and
reliefs may make the effective rates lower.
So who gained from the 2002 Budget? Arguably, the Chancellor would say that we will all benefit
from the improvements proposed for the National Health Service. That aside, the improved tax
credits regime will benefit many families and new and enhanced reliefs will benefit many
businesses. For the rest, life continues much as before.
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