More than 600,000 small businesses will be given full business rate tax relief under new proposals outlined by the Chancellor in his 2016 Budget speech.
Businesses in premises with a rateable value of £12,000 and below will receive 100 per cent relief, while firms with a rateable value between £12,000 and £15,000 will be given tapered relief.
George Osborne said business rates weigh down on many small enterprises and he claimed that the change could save small companies £5,900 a year.
In addition, he said the threshold for the standard rate would rise from £18,000 to £51,000, which will take 250,000 smaller properties out of the higher rate.
The change will come into effect from April 2017
Mr Osborne added: “A further quarter of a million businesses will see their rates cut. In total, half of all British properties will see their business rates fall or be abolished altogether.”
Both the Federation of Small Businesses (FSB) and Confederation of British Industry (CBI) had called on the Government to overhaul the rates to save firms £1.6bn over the next five years.
Welcoming the move, Mike Cherry, policy director at the FSB, said: “The combined measures announced on business rates – the single biggest tax cut in today’s Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform.”
Carolyn Fairbairn, CBI director general, said: “In addition to small firms being taken out of the regime and changes to the uprating mechanism, all companies will welcome more frequent revaluations, which the CBI has long been calling for.”
Mr Osborne also announced further cuts on corporation tax to 17 per cent for the financial year commencing 1 April 2020. In the last parliament, the Government cut the main rate of corporation tax from 28 per cent to 20 per cent.
The Government claims that the reductions to corporation tax delivered since 2010 will be worth almost £15bn a year to business by 2021.
One of the other more notable reforms were made to National Insurance Contributions (NICs). Mr Osborne announced that from 2018, self-employed individuals who make profits up to £8,060 will no longer have to pay NICS.
Justin King, a chartered financial planner with Dorset-based MFP Wealth Management, said: “I thought that it was an interesting Budget, all in all. The news on the business rates is great news because it affects me. I am moving from smaller premises which has a rateable value of around £5,500 – which means it is extempt from business rates – to a larger unit, which has a rateable value of around £11,000 which is taxable under the current regime but won’t be come April next year.
“I am not going to defer moving into the larger unit until next year to avoid paying the business rates, but it is good to know that the tax relief will kick in.”