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Budget: The new "competitive" UK tax system

Cuts to corporation tax and a £2,000 (€2,300) allowance towards employer national insurance contributions are among the measures most likely to affect family businesses in the latest UK budget.
George Osborne with the latest UK budget
© Press Association

Cuts to corporation tax and a £2,000 (€2,300) allowance towards employer national insurance contributions are among the measures most likely to affect family businesses in the latest UK budget.

George Osborne, the chancellor of the exchequer, announced corporation tax would be reduced to 20% from April 2015 – making the UK tax system "one of the most competitive in the G20", according to the UK's coalition government.

Juliette Johnson, head of the UK family business division at private bank Coutts, told CampdenFB: "This will give the UK the lowest business tax of any major economy in the world and should serve as an incentive to attract large international family businesses into the UK.

"The simplification of the system will also be welcomed by family businesses, as by merging the small company and main rates at 20p, the complex marginal relief calculation is being abolished."

It is the third time Osborne has cut corporation tax – the current rate of 24% is scheduled to drop to 21% in April 2014, and it stood at 28% when the coalition came to power.

Johnson said the cut to national insurance contributions would be “a welcome and encouraging relief to small family businesses”, as investment in "people capital" is often important to them.

However, she reckoned: "This reduction alone is unlikely to be the driver to get family businesses to employ more people, but it gives a small recognition of the need to give a boost to employment and the development of staff within businesses."

Coinciding with the new budget, the Office for Budget Responsibility announced on 20 March it had cut its growth forecast for the UK economy to 0.6% for 2013, down from an original prediction of 1.2%.

Other measures to stimulate the economy included plans to increase capital spending by £3 billion a year from 2015-2016, funded through reductions in current spending; a £5.4 billion support package to boost the housing market and £1.6 billion industrial strategy, part of which will go towards creating the UK Aerospace Technology Institute.

Osborne said in the House of Commons on 20 March: "This is a budget for those who aspire to own their own home, who aspire to get their first job, or start their own businesses." 

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